SFDR, One Year On: The Trends and Anatomy of Article 8 & 9 Funds

One year after the launch of the first stage of the European Sustainable Finance Disclosure Regulation (SFDR), SFDR funds are growing significantly compared to non-ESG counterparts. Flows into Article 8 & 9 funds have significantly outpaced non-ESG, despite the latter representing nearly 2x the number of funds. Based on fund holdings analysis, the GS SUSTAIN team believes this acceleration of flows into SFDR ESG funds will lead to significant impacts on capital flows away from currently perceived non-ESG friendly sectors towards more ESG friendly sectors in Utilities, Renewables and Industrials, which they view as currently most overweight today. The GS SUSTAIN team has reviewed the implications of the SFDR regulation and disclosure requirements. Their analysis of the various approaches taken across asset managers concludes that not all Article 8 or 9 funds are created equal, in a good way.