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What You Need to Know About SFDR Article 8 Funds

Article 8 fund flows rebounded in the first quarter, netting EUR 14 billion of new money. See what’s behind the trend.


Under the Sustainable Finance Disclosure Regulation, asset managers must provide more information on sustainability risks and impact of investment products sold in the European Union.

The level of disclosure depends on the products’ sustainability objective, or classification as Article 8 or Article 9 funds.

In the first quarter of 2024, Article 8 funds rebounded after three-quarters of outflows. In contrast, Article 9 funds bled money for the second quarter in a row.

What’s behind this shift?

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

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

Let’s dig in.

What Are the Requirements for Article 8 Funds?

Article 8 funds promote environmental or social characteristics. Holdings should generally help attain the environmental or social characteristics promoted.

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.


Article 8 funds maintained the majority of market share as of March 2024.

All Article 8 and Article 9 products are required to disclose if they consider Principal Adverse Impact indicators. These capture the potential negative impacts that a financial product may have on sustainability factors relating to:

  • 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.

Why Did Investors Pour Money Into Article 8 Funds in Q1?

Flows into Article 8 funds turned positive in the first quarter of 2024, netting EUR 14 billion, after three quarters of redemptions totaling EUR 52 billion.

In comparison, Article 6 funds, which have no ESG characteristics, collected EUR 43 billion in net subscriptions, representing a significant increase from the past three quarters of small inflows. Once again, Article 6 funds attracted more inflows than Article 8 and Article 9 funds.

Fixed income was the only asset class recording inflows to the Article 8 category last quarter. Article 8 bond strategies collectively garnered EUR 46 billion. In comparison, flows into Article 6 fixed-income products reached only EUR 28 billion.

This recent trend could be explained by a few reasons:

  • High interest rates. Investors may expect that the “higher for longer” interest-rate environment will favor investment-grade bonds, which tend to make up ESG-oriented portfolios.
  • Ever-evolving regulations. In the European Union, the outlook for SFDR looks uncertain. Legislators also agreed upon a flurry of initiatives before the EU elections.
  • Greenwashing accusations.
Chart showing the net flows into Article 8, Article 9, and Article 6 funds per asset class.

Source: Morningstar Direct. Data as of March 2024. Based on SFDR data collected from prospectuses on 98% of funds available for sale in the EU, excluding money market funds, funds of funds, and feeder funds.

What Proportion of Funds Are Article 8?

Combined assets in Article 8 and Article 9 funds increased by more than 4% over the first quarter of the year to EUR 5.5 trillion, beating last quarter’s record. Collectively, the funds saw their market share climb to nearly 60% of the EU universe.

Article 8 funds maintained their market share at around 55% at the end of 2023. Product reclassification activity and market appreciation drove this absolute and relative increase. We identified 218 funds that upgraded to Article 8 from Article 6 in the fourth quarter.

Measured by number of funds, the Article 8 category grew steadily to 10,964 at the end of March, taking up 44.3% of the market share.


Source: Morningstar Direct. Assets as of March 2024. Based on SFDR data collected from prospectuses on 98% of funds available for sale in the EU, excluding money market funds, funds of funds, and feeder funds.

How Many Article 8 Funds Launched in 2023?

About 150 new Article 8 funds launched in the first quarter of 2024. Although this number will likely be restated upward as we identify more launches, it currently represents a 33% decrease compared with the previous quarter.

Chart showing the quarterly number of Article 8 and 9 fund launches, from 2021 through 2024.

Quarterly number of fund launches. Source: Morningstar Direct. Data as of March 2024. Based on SFDR data collected from prospectuses on 98% of funds available for sale in the EU, excluding money market funds, funds of funds, and feeder funds.

How Well Do Article 8 Funds Manage ESG Risks?

The Morningstar Sustainability Rating can help answer this question.

The Sustainability Rating is an asset-weighted roll-up of Morningstar Sustainalytics’ company and sovereign ESG Risk Ratings based on the trailing 12 months of a fund's portfolios.

Intuitively, we would expect Article 8 funds to be managing their ESG risks better than Article 6 funds.

Our research suggests that this is true.

The ratings distribution is skewed toward higher Sustainability Ratings for Article 8 funds. As of December 2023, 51% of Article 8 funds received the highest ratings, 4 or 5 globes, compared with 33.4% of Article 6 funds.

Over One-Third of Article 8 Funds Target No Sustainable Investments

The amended MiFID II directive requires financial intermediaries to consider clients’ sustainability preferences when conducting suitability assessments. If clients express interest in making sustainable investments, financial intermediaries have to accommodate.

Depending on the client’s preferences, financial intermediaries will have to source products that have a minimum proportion of sustainable investments as defined by the SFDR or the EU Taxonomy.

Clients may also choose only investments that consider principal adverse impacts.

To support this process, industry representatives developed the European ESG template, or EET, to ease data exchange between asset managers and distributors.

As of March 2024, Morningstar had collected EET data on 74% of all share classes in the scope of MiFID II. These represent 21,356 funds, including 10,778 Article 8 funds.

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

  • EU SFDR minimum or planned sustainable investments, representing the minimum percentage of portfolio investments that are deemed sustainable but are not taxonomy-aligned.
  • EU SFDR minimum or planned taxonomy-aligned sustainable investments, representing the minimum percentage of the portfolio that is aligned 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.

The number of Article 8 funds with 0% values reached over 3,023 at the end of March, a marginal increase over last December.

More Article 8 funds commit to make environmental investments than social investments. Over one-third of Article 8 funds target environmental investments, while 26% of funds commit to holding social investments.

Go Deeper Into Article 8 and 9 Funds

For a more detailed breakdown, the full report covers:

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

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