SFDR Sustainable Fund Assets Climb to EUR 6.4 Trillion Despite Flow Slowdown

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.

This report provides an update on the landscape of Article 8 and Article 9 funds (excluding money market funds, funds of funds, and feeder funds) as at the end of June 2025, examining aspects such as flows, assets, launches, closures, reclassifications, and fund name changes, as asset managers rushed to comply with the European Securities and Markets Authority’s guidelines on funds using ESG or sustainability-related terms in their names ahead of the May 21 deadline.

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 second quarter of 2025, Article 8 funds netted EUR 43 billion in new money. This marks a decrease from the EUR 52 billion inflows in the previous quarter. Article 8 fund flows represented 35% of overall EU fund flows in the second quarter of the year. 

Meanwhile, Article 9 funds continued to experience outflows for the seventh consecutive quarter, though redemptions were limited to EUR 1.3 billion — an improvement from the nearly EUR 8 billion in outflows seen in the first quarter. By contrast, with EUR 82 billion in net subscriptions, Article 6 funds continued to dominate flows, although these were significantly lower relative to the first quarter, when inflows reached a record high of EUR 116 billion.

Overall, investors were cautious amid rising geopolitical tensions, US tariffs, and economic uncertainty. For sustainability-focused investors, this was compounded by the ongoing uncertainty over ESG-related regulations, amid rollbacks and implementation delays in the US and EU.

For context, the Morningstar Global Market Index still gained 11.5% over the period, while the Morningstar Global Core Bond Index rose by 4.3%. Calculated as net flows relative to total assets at the start of the period, the organic growth rate (OGR) of the Article 8 universe showed a minor decline to 0.72% over the last three months. This remains well below the 1.8% OGR of Article 6 funds. Article 9 funds saw their organic growth rate improve slightly to negative 0.4%.

Combined assets in Article 8 and Article 9 funds rose by 3% to EUR 6.4 trillion at the end of June, accounting for 59% of the total market share, unchanged from the previous quarter.

In terms of assets, Article 8 funds’ market share slightly increased to 55.7% from 56.3%.

In the second quarter of the year, 151 new Article 8 and Article 9 funds hit the shelves. This is lower than the 171 new Article 8 or Article 9 products launched in the prior quarter. As we continue to analyze the data and identify additional launches, numbers could be adjusted in the next report.

Newly launched Article 8 and Article 9 funds accounted for 43% of all funds launched in the EU, noticeably down from 48% in the previous quarter, confirming a continued downward trend compared to last year.

As in the previous quarter, fixed income strategies continued to dominate Article 8 fund flows in Q2 2025, attracting about EUR 45 billion in net subscriptions, well ahead of the EUR 21.8 billion recorded by Article 6 fixed income funds. In contrast, Article 9 fixed income funds saw inflows decline to EUR 106 million, down from a restated EUR 700 million in the previous quarter.

Fixed income has consistently shown resilience. This trend underscores the bond market's continued role as a key investment focus, as it offers both yield opportunities and defensive positioning for cautious investors.

Meanwhile, investors withdrew just over EUR 10 billion from equity funds classified under both Article 8 and Article 9 during the second quarter, while Article 6 equity funds garnered close to USD 53 billion, less than in the prior quarter (EUR 76 billion).

After an already busy first quarter, fund renaming activity reached a new high in the second quarter as asset managers rushed to implement the ESMA fund naming guidelines ahead of the May 21 deadline. The guidelines aim to protect investors against greenwashing risk and provide minimum standards for funds that use specific ESG terms in their names. The minimum standards depend on the terms used, as outlined in the ESMA Guidelines on ESG Funds' Names report.

Renaming activity started to grow in the last quarter of 2024 and reached a record level in the second quarter of 2025. Between April and June, we identified 602 renamed Article 8 and Article 9 funds. This number includes 382 funds that dropped ESG-related terms, 193 that swapped terms, and 27 that added ESG-related terms. Focusing on Article 8 funds, 378 removed ESG-related terms from their names, 170 swapped terms, and 25 added ESG-related terms.

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.

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.