SFDR Article 8 Funds Netted the Highest Inflows in Three Years. What’s Behind Their Growth?

Under the Sustainable Finance Disclosure Regulation, EU asset managers must provide more information on sustainability risks and the impact of investment products. The level of disclosure depends on a product’s classification as an Article 8 or Article 9 fund.

In the first quarter of 2025, “light green” Article 8 funds netted about EUR 52 billion of new money, the highest inflows since late 2021. But these pale in comparison to Article 6 inflows, which reached EUR 112 billion in the last three months. In contrast, “dark-green” Article 9 funds bled money for the sixth quarter in a row.

What’s behind this trend?

Our researchers dissected Article 8 and Article 9 funds with Morningstar’s climate data.

For more in-depth analysis, download the free SFDR funds report.

Article 8 funds promote environmental or social characteristics. Holdings should generally help attain the environmental or social characteristics promoted. In comparison, Article 9 funds have an explicit sustainable-investment objective.

Funds that promote an environmental characteristic must additionally disclose alignment with the EU Taxonomy of Sustainable Activities. These funds also must indicate if they invest a proportion in environmentally sustainable investments.

All Article 8 and Article 9 products must disclose if they consider Principal Adverse Impact indicators. These capture the potential negative impact of financial products on:

• Environmental, social, and employee matters
• Respect for human rights
• Anticorruption and antibribery matters

The Sustainable Finance Disclosure Regulation outlines 64 indicators. Of these, 14 are currently mandatory (on a comply-or-explain basis) for corporate investments:

• Greenhouse gas emissions
• Carbon footprint
• Greenhouse gas intensity of investee companies
• Exposure to companies active in the fossil fuel sector
• Share of nonrenewable energy consumption production
• Energy consumption intensity per high impact climate sector
• Activities negatively affecting biodiversity-sensitive areas
• Emissions to water
• Hazardous waste ratio
• Violations of the UN Global Compact principles and Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises
• Lack of processes and compliance mechanisms to monitor compliance
• Unadjusted gender pay gap
• Board gender diversity
• Exposure to controversial weapons

Two are mandatory for sovereign and supranational issuers:

• Greenhouse gas intensity of investee countries
• Number of investee countries subject to social violations

And two are mandatory for real estate assets:

• Exposure to real estate assets involved in the extraction, storage, and transport of fossil fuels
• Exposure to energy-inefficient real estate assets

In the first quarter of 2025, Article 8 funds netted about EUR 52 billion of new money. Inflows notched a minor uptick over the restated EUR 48 billion in the second quarter.

But these pale in comparison to inflows into Article 6 funds, which don’t promote any ESG characteristics. Article 6 funds brought in EUR 112 billion last quarter after garnering almost EUR 97 billion in the restated second quarter.

Almost all the growth in Article 8 fund flows came from fixed-income investment funds, which racked up inflows across all SFDR classifications. Article 8 bond funds attracted EUR 49.3 billion in the third quarter.

In comparison, flows into Article 6 fixed-income products collected EUR 29.4 billion.

These recent trends could be explained by a few reasons:

• Economic uncertainties. Amid rising geopolitical and trade tensions, investors have recently preferred the bond market.
• Interest in European equity funds. Both Article 6 and Article 8 funds garnered inflows since the beginning of the year. The European market shows signs of economic resilience and relative political stability compared to that of the United States.
• Evolving regulations. In the European Union, the outlook for SFDR looks uncertain. Asset managers are rushing to comply with fund naming guidelines by the May 21 deadline.

At the end of the first quarter of 2025, Article 8 funds made up most of the European Union fund universe by assets.

Article 8 funds’ market share declined slightly to 55.2% from 56.8% three months earlier. SFDR reclassifications slowed, with about 66 funds upgrading their SFDR status from Article 6 to Article 8.

Measured by number of funds, the Article 8 category held steady at 46.9% of the market.

About 164 new SFDR Article 8 funds launched in the first quarter of 2025, spanning asset classes, market exposures, investment styles, and ESG strategies. In the first quarter, newly incepted Article 8 and Article 9 funds accounted for 55% of the total number of funds launched in the EU.

Article 8 and 9 fund closures were down by a third over the previous quarter. The number of closures, 109, was also slightly below the total in the first quarter of 2024.

The amended MiFID II directive requires financial intermediaries to consider clients’ sustainability preferences when assessing suitability. If clients express interest in sustainable investments, they must accommodate.

The European ESG template, or EET, supports this process. As of March 2025, Morningstar had collected EET data on 22,944 funds, including 11,908 Article 8 funds.

Morningstar Direct covers key European ESG template data points, including:

• SFDR minimum or planned sustainable investments. This represents the minimum percentage of portfolio investments deemed sustainable but not taxonomy-aligned.
• SFDR minimum or planned taxonomy-aligned sustainable investments. This represents the minimum percentage of the portfolio that aligns with the EU Taxonomy.
• PAI consideration, indicating whether a product considers principal adverse impact in its investments.

Today, close to two-thirds of Article 8 funds commit to making some sustainable investments. However, more Article 8 funds, about 75%, report making sustainable investments. This suggests that fund managers are cautious with their precontractual commitments.

For a more detailed breakdown, download the Article 8 and 9 research report. The full report covers:

• Top 20 asset managers by Article 8 fund assets.
• The 20 largest Article 8 funds.
• The asset class mix of Article 8 funds.
• The 10 Article 8 funds with the highest inflows and outflows.