Nearly a quarter (23%) of funds categorised as Article 8 under the EU’s Sustainable Finance Disclosure Regulation (SFDR) remain at risk of greenwashing. The ‘2025 ESG and Sustainable Barometer’ report, published by data provider MainStreet Partners, analysed over 9,500 investment strategies that fall under SFDR. The report also revealed that the number of Article 9 funds at risk of greenwashing has fallen to 3%. Thirteen percent of those assessed failed their regulatory adherence appraisal, the report noted. “At the start of 2024, you may have been forgiven for thinking we would see less regulatory complexity than in the past three years,” said Neill Blanks, MainStreet’s Managing Director. “Unfortunately, that was far from the case, not least as fund naming rules came into effect on both sides of the Atlantic.” The report also found that the proportion of funds under the Paris Aligned Benchmark regime that are in breach of their required exclusions has remained high at 72%. Meanwhile, breaches of the Carbon Transitional Benchmark exclusion requirements have increased from 36% to 49%. The data provider noted that this increase is primarily due to the overall reduction in the number of funds in scope of the regulation. “As markets continue to adapt to new frameworks, we expect to see a broader range of ESG and sustainable investment products,” said Blanks. “These products will have clear and specific key performance indicators linked to the fund’s ESG and sustainable approach, allowing investors to better understand the intentions of the strategy, and most importantly help reduce the risk of greenwashing.”
