A report by the Maples Group shows how the Sustainable Finance Disclosure Regulation (SFDR) has shaken up the European asset-management landscape.

The analysis, based on a review of over 26,000 funds in Ireland and Luxembourg – the two largest fund domiciles in the EU – shows a 20% growth, year-on-year, in the number of European sustainability funds, with assets now surpassing €5 trillion.

Trends

The Maples Group report is in its second edition and examines sustainable investing trends in Europe.

Key findings include:

• 19% increase in asset value of European sustainability funds over the last 12 months, now standing at over €5.5 trillion,
• 28% of Irish and Luxembourg-domiciled funds are sustainability-focused funds (either SFDR Article 8 or SFDR Article 9 funds),
• 39% of all assets held in Luxembourg and Irish domiciled funds are sustainability-focused funds,
• 51% of all new funds launched in Europe in 2023 are now classified as sustainably focused.
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Head of sustainable investment team Ian Conlon said the report shows that SFDR is working as a catalyst for the transition to a low-carbon, more sustainable economy.

It has increased the flow of capital towards sustainable activities and enhanced the transparency and accountability of sustainability disclosures, he added.

Risk

Head of the sustainable investment team Ian Conlon said that the report showed that SFDR is working as a catalyst for the transition to a low-carbon, more sustainable economy.

It has increased the flow of capital towards sustainable activities, and enhanced the transparency and accountability of sustainability disclosures, he added.

Risk

A regulatory risk for compliance gaps remains, however.

Conlon warned: “We believe that asset managers need to adopt a proactive and holistic approach to SFDR compliance, by ensuring that their policies, procedures, resources, and disclosures are aligned with their sustainability objectives and strategies, and by staying abreast of the latest developments and best practices in sustainable finance."

Michelle Barry (Luxembourg funds and investment management partner) added: "The impact of SFDR remains pronounced in the retail/UCITS space, in both Ireland and Luxembourg.

“This is principally driven by a combination of investor sentiment, regulatory requirements and traditional distribution channels. While the number of sustainably-focused alternative investment funds remains lower, that number is growing,” she said.