Regulatory clarity required to sustain further growth
Today, the European Fund and Asset Management Association (EFAMA) published the latest edition of its Market Insights series, titled “Sustainable equity UCITS: promoting sustainable business models”. This publication provides an in-depth analysis of the trends and dynamics within the sustainable equity UCITS market, covering the rapid growth in net assets and the evolving investor landscape over recent years.
Sustainable equity UCITS comprised 24% of total sustainable UCITS in 2023, up from 15% in 2019. Net assets of these funds have more than doubled over the past five years, increasing from EUR 0.6 trillion to EUR 1.3 trillion.
Despite market volatility and economic uncertainties, sustainable equity UCITS have demonstrated resilience with positive net inflows, particularly notable in 2021 when the net inflows amounted to EUR 231 billion. While the net inflows were lower in 2022 and 2023, the demand for these funds remained strong compared to global trends, highlighting investor confidence in sustainable investments.
Almost 20% of sustainable equity UCITS are classified as Article 9 funds, while 70% are Article 8, reflecting cautious investor sentiment amidst regulatory uncertainties. The ongoing review of the Sustainable Finance Disclosure Regulation (SFDR) is expected to provide clearer definitions and support for transition finance.
On average, sustainable equity funds have consistently delivered positive net performances, comparable to non-sustainable equity UCITS. These funds tend to be cost-effective, benefiting investors with sustainability preferences.
Vera Jotanovic, Senior Economist at EFAMA, commented: “Sustainable equity UCITS not only encompass a wide range of sustainability themes catering to varied investor preferences, but are also a resilient investment product with competitive returns. This makes them an attractive option for investors.”
Anyve Arakelijan, Policy Advisor at EFAMA, added:“As the regulatory landscape evolves, we expect the sustainable finance framework to become more investor-centric, resolve inconsistencies with other EU regulations, and provide greater support for transition finance, further driving sustainable progress and achieving the EU’s long-term sustainability goals.”
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Notes to Editors
More info on Market Insights can be found on our website here.
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Hayley McEwen
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About the Market Insights
EFAMA’s Market Insights series analyses recent industry trends and developments based on the latest available data and presents our findings in the context of current policy perspectives. We publish numerous concise reports each year covering diverse topics such as competitiveness, ETFs, AIFs, SFDR, the impact of inflation on retail investors, sustainable bond funds, UCITS costs and performance, ESG fund markets, and money market funds.
