Stockholm (NordSIP) – Although it was not the intention of regulators, the implementation of the EU’s Sustainable Finance Disclosure Regulation (SFDR) led European fund managers to classify their products along the lines delineated by the new rules.
Now, the European Fund and Asset Management Association (EFAMA) released its latest Market Insights report titled “The European ESG market – Introducing the SFDR”. The full report breaks down the size of the European ESG market, reviewing the assets under management of funds using SFDR .
The implementation of SFDR has, in practice, split the EU fund universe into three categories. According to EFAMA, Article 6 are funds that integrate sustainability risks, Article 8 are funds with sustainability characteristics and Article 9 are funds that have sustainability objectives.The new Market Insights marks the first time EFAMA, in cooperation with national associations, has collected data on SFDR Article 8 and 9 funds specifically.
“The coverage of funds by SFDR Articles 8 and 9 is considerably uneven across Europe. Various factors play a role here, such as different SFDR Level 1 text interpretations by national regulators, the delayed implementation of the Level 2 measures and varying maturity levels of ESG fund markets between Member States. These survey results provide a first picture of a market that remains in full flux and should therefore, be treated with some caution. The ESG market has already undergone significant changes since the SFDR introduction and will undoubtedly undergo further changes in the coming months and years,” Thomas Tilley, Senior Economist at EFAMA, commented
According to EFAMA’s survey, there was a total of €3.7 trillion in net assets managed by SFDR Article 8 funds. This represented 22% of the European fund market at the end of the first quarter of 2021. 35% of this was domiciled in Luxembourg, with the rest being registered in France (16%), the Netherlands (13%), Sweden (13%) and Ireland (9%). Article 8 funds represent 92% Sweden’s domestic market share. Article 8 funds represented 50% of domestic market share in Belgium and 48% in the Netherlands.
According to the report, there was a total of €340 billion, in net assets managed by SFDR Article 9 funds, representing approximately 2% of the European fund market at the end of Q1 2021. Luxembourg accounted for more than half of total SFDR Article 9 fund net assets, followed by France (16%) and the Netherlands (9%). SFDR Article 9 funds accounted for 0% to 4% of national domiciled funds.
Equity funds accounted for 47% of all Article 8 funds and 71% of all Article 9 funds, whereas they only accounted for 30% of the total UCITS and AIF markets. Asset managers in Europe applied an ESG investment approach to a total of €11 trillion of assets, funds and mandates, at the end of Q1 2021. This figure is slightly higher than the €10.7 trillion estimate for 2019.
“The European Union is taking a global lead in standardising funds´ sustainability disclosures with SFDR, thereby contributing to the redirection of capital flows towards sustainable projects and businesses. This new legislation will reduce the information asymmetries on ESG issues, ultimately empowering end investors to play a role in financing solutions for pressing societal challenges,” Tanguy van de Werve, EFAMA Director General, concluded.