The European Fund and Asset Management Association (EFAMA) has published the 12th issue of its Market Insights series. Titled The SFDR Fund Market – State of Play, it takes a look at the latest trends in the Article 8 and 9 fund markets as defined by the Sustainable Finance Disclosure Regulation (SFDR). The report traces the development of the funds from the time SFDR came into force in 2021 until the second half of 2022 and concludes with EFAMA’s recommendations for outstanding policy issues.

The lucky eight

The report finds that the net assets of SFDR Article 8 funds rose by 17 percent in the second half of 2022 to €6.4 trillion, taking up 45 percent of the total UCITS and AIF markets. This was in contrast to a 1.7 percent decline in total UCITS and AIF net assets during the same period.

EFAMA attributes a large part of the increase in Article 8 funds to reclassification – according to Morningstar, a total of 400 funds were reclassified from Article 6 to 8 in the second half of 2022. 348 funds were downgraded from Article 9 to 8 in the same period in anticipation of the tightening of criteria in SFDR’s Level 2.


The main domiciles of Article 8 funds as of the end of 2022 were Luxembourg (34 percent), Ireland (16 percent), France (14 percent), The Netherlands (10 percent), and Sweden (seven percent).

Few are on cloud nine

The report also observes that Article 9 funds accounted for €341 billion, or 2.4 percent of the European fund market at the end of last year. Net assets of Article 9 funds were 19 percent lower at the end of the second half of 2022 than at the end of the first half due to the reclassification mentioned above. The biggest domiciles of Article 9 funds at the end of the year were Luxembourg (51 percent), France (18 percent), and Ireland (seven percent).

The recommendations

The most significant issue in SFDR disclosures is “the lack of reliable standardised ESG data on investee companies”, writes EFAMA. It recommends that further guidance and clarification of concepts should be “embedded into existing frameworks” and be made “consistent across the investment value chain”. “Consistency in interpreting EU regulations” is key to helping asset managers who are operating cross-borders “maintain a coherent and uniform approach at the EU level”.