An upcoming review of EU disclosure rules is an opportunity to stem outflows from sustainable funds, according to the European Fund and Asset Management Association (EFAMA). EFAMA’s latest Market Insights report found that funds categorised as Article 9 under the Sustainable Finance Disclosure Regulation (SFDR) saw a steady decline in net assets during 2024. Article 9 fund net assets amounted to €353 billion at the end of 2024, or about 2% of the European fund market, declining by 3.3% compared to the end of 2023. EFAMA primarily attributed this to the relatively high share of actively managed equity vehicles among Article 9 funds which saw a general sell-off over recent quarters as investors shifted to exchange-traded funds (ETFs). The net assets of Article 8 funds have remained broadly stable at 51% of the European fund market in 2024, the report added. In light of this, EFAMA has called for the upcoming SFDR review to focus on increasing transparency and accessibility for retail investors, aligning with the rest of the EU’s sustainable finance framework – particularly the Corporate Sustainability Reporting Directive – and ensuring thorough market impact analysis. “Recent outflows from Article 9 funds, which are funds with an explicit sustainability objective, may indicate changing sustainability preferences, but are more likely a reflection of investors’ strong preference for ETFs,” said Thomas Tilley, EFAMA’s Senior Economist. “They underscore that the upcoming review of the SFDR framework is timely if we want to ensure sustained financing for the transition to a green economy.”
