While the upgrade of SFDR funds is still in full swing, light green funds did not escape this year’s market violence. Article 6 and Article 8 funds saw a hefty outflow of assets. The greenest funds did manage to attract new assets.
Article 8 funds saw net outflows of 28.7 billion euros in the third quarter of 2022. This was reported by Morningstar in a press release this week. Article 6 funds clearly lost out with an outflow of 62.1 billion euros, according to the financial services provider’s data.
According to Hortense Bioy, head of passive fund research in Europe at Morningstar, the outflows were due to “persistent inflationary pressures, interest rate hikes, an impending global recession and geopolitical risks following the Russian invasion of Ukraine”.
In contrast, Article 9 funds - funds that invest sustainably or have carbon reduction as a target - saw net inflows of €12.6 billion. In the second quarter, it was only 6 billion, Morningstar said.
Article 9 funds see peak organic growth
“The more positive picture for Article 9 funds is all the more striking when looking at organic growth rates,” Bioy wrote in a release. “Organic growth rates for Article 9 products were the highest since the introduction of SFDR and have remained positive this year. Meanwhile, organic growth rates for Article 8 and Article 6 funds sank deeper,” Bioy said.
Bioy: “Despite net outflows and declining market prices,”, said Bioy “assets under management in the Article 8 and Article 9 rose almost 3 per cent to EUR 4,300 billion in the third quarter, thanks to newly launched and reclassified funds. By comparison, assets in the Article 6 funds fell nearly 7 per cent in the period.”
Reclassification mainly up
The lowering of SFDR ratings by Dutch asset managers in the third quarter is not yet a European trend. Morningstar’s data shows that 383 funds changed their SFDR status in the third quarter versus 41 downgrades from Section 9 to 8.
342 changes were upgrades, 315 adjustments up from Article 6 to Article 8, seven funds were upgraded from Article 6 to Article 9 and 20 funds made the move from 8 to 9. In light of recent developments regarding the tightening definitions of SFDR classifications, Bioy said it can be expected that more Article 9 products will be reclassified to Article 8 in the coming months.