Maples Group’s Second SFDR Impact Analysis Reveals 20% Growth in Sustainability Focused Funds, with Assets now Exceeding €5 Trillion

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

The Maples Group’s report, titled ‘SFDR Impact Analysis: A Comprehensive Review of ESG Integration in Europe’, is the second edition of a series that examines the current state and future trends of sustainable investing in Europe. The report is designed to assist asset managers in navigating the complex and evolving SFDR requirements, as well as providing valuable insights and peer analysis on the approaches taken to date.

Key findings include:

• 19% increase in the 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 (i.e. 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.

Ian Conlon, Ireland Funds & Investment Management Partner and Head of the Irish Sustainable Investing team, said: “We are delighted to publish this second edition of our SFDR Impact Analysis, which provides asset managers with a valuable resource to navigate the complex and evolving regulatory framework of sustainable finance in Europe. As our analysis demonstrates, SFDR is working as a catalyst for the transition to a low-carbon, more sustainable economy, by increasing the flow of capital towards sustainable activities and enhancing the transparency and accountability of sustainability disclosures.

We also highlight the challenges and risks that asset managers face in complying with SFDR and from a regulatory context there remains the risk for compliance gaps. 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 & 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. This is particularly evident in Luxembourg, where there are significant growth trends for renewable energy and energy transition infrastructure funds.”

The Maples Group’s analysis covers topics such as product design, fund categorisation, website disclosures, periodic reporting, entity level obligations, and distribution challenges under SFDR. It also provides insights into the key developments in sustainable finance, such as the proposed SFDR 2.0, the Corporate Sustainability Reporting Directive (“CSRD”), and the ESMA greenwashing report.

Authored by lawyers from the Maples Group’s Irish and Luxembourg ESG practices, the report demonstrates the extensive experience and expertise the firm has in advising asset managers on SFDR and other sustainable finance regulations and initiatives.

A full copy of the SFDR Impact Analysis 2nd Edition is available for download on maples.com/sfdr