New Maples Group Analysis Shows 40% Growth in Irish Sustainability Funds
The Maples Group is pleased to launch the inaugural edition of ‘SFDR Impact Analysis’, a detailed assessment of the current state of ESG integration in Europe. With a focus on Irish funds in the first edition, the study demonstrates the significant impact that the recent Sustainable Finance Disclosure Regulation (“SFDR”) has had on product design, asset allocation and fund distribution, while also providing valuable peer analysis on SFDR approaches taken to date.
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A summary of the Maples Group’s key insights are as follows:
- 23% of Irish-domiciled funds are sustainability-focused funds, i.e. categorised as either SFDR Article 8 or SFDR Article 9 funds.
- Irish-domiciled sustainability-focused funds have grown by more than 40% in the last two years.
- Approximately 90% of all Irish Article 8 and Article 9 funds are structured as UCITS funds.
- Approximately 3% of Irish-domiciled funds have opted for SFDR Article 9 categorisation.
- Only 15% of Article 9 funds commit to holding taxonomy-aligned investments.
- Only 6% of Irish Article 8 funds would be eligible to use ESG or sustainability-related terms in their naming conventions if proposed ESMA rules are adopted.
- Third-party AIFMs and UCITS management companies manage 35% of all Irish-domiciled funds, who in aggregate manage approximately 25% of all Irish-domiciled Article 8 and Article 9 funds.
- Third-party AIFMs and UCITS management companies are placing reliance on delegate investment managers for SFDR compliance – our analysis found potentially significant regulatory gaps in that model.
- An industry focus on SFDR website disclosure content and location rules is required.
As part of the Maples Group’s analysis, over 6,400 Irish-domiciled funds as well as their asset managers were examined. Notably, findings from the study reveal that Irish sustainability-focused funds are growing and the current rate of growth is consistent with other European jurisdictions. The analysis does a deep dive into Article 8 and 9 funds in particular how managers are approaching these SFDR categorisations in terms of asset allocation as well as commitments to sustainable investments and taxonomy alignment.
Since SFDR was introduced in March 2021, the number of Irish-domiciled Article 8 funds has grown by more than 40%. The growth of the Article 8 funds in Ireland is consistent with the wider European position where approximately 44% of all new fund launches in Q4 2022 were categorised as Article 8 funds.
The Maples Group’s analysis also included examining SFDR website disclosures of the top 30 asset managers operating in Ireland. Encouragingly, the vast majority of the asset managers sampled included the prescribed SFDR sustainability disclosures on their websites; however only half of the asset managers sampled complied with the SFDR website location rules. The analysis makes a series of recommendations for action that asset managers can take to improve their sustainability governance and avoid regulatory scrutiny.
Commenting on the analysis, Ian Conlon Funds & Investment Management Partner and Head of the Irish ESG Advisory team said, “We are delighted to share this first edition of our SFDR Impact Analysis and hope that our analysis will assist asset managers who are considering establishing or marketing sustainability-focused funds in Europe. While the 40% growth in sustainability-focused funds is positive in Ireland, we anticipate that this figure will grow exponentially in the coming years with investors demanding a move towards more ethical and responsible investment.”
In Ireland, the Maples Group is the market-leading legal adviser to Irish-serviced funds having advised on 1,470 funds in 20221, a position it has maintained for 10 consecutive years. As a result of acting on the greatest volume of Irish funds for such a sustained period, the Group has a more rounded exposure to what is happening at the cutting edge of the Irish asset management market enabling them to track all relevant information and statistics on new product trends and innovative fund structuring.
Peter Stapleton, Managing Partner and Global Lead on ESG at the Maples Group commented: “I would like to commend our Irish team on this excellent inaugural edition. I trust it will be of significant value to our international clients and the many industry participants and advisers we collaborate with in the area of sustainable finance. Our work on Ireland is part of a wider global ESG initiative across our all of offices and business lines. Our legal teams and colleagues in MaplesFS have worked on some of the largest and most innovative ESG deals to date and offer a comprehensive range of services for our clients. I look forward to continuing our work in this area and to future editions.”
1 Monterey Insight Ireland Fund Report 2022