Article 8 funds increase by 20% in 2023

Mainstreet Partners has published its 2024 ESG Barometer report that examines trends in ESG investing across 7700 funds & ETFs.

The report shows a 20% year-on-year increase in the number of Article 8 funds in 2023. However, according to Mainstreet, 24% of all Article 8 funds could be accused of greenwashing based on their sustainability framework and practices.

The report also finds that Scope 3 adoption within investment processes remains limited with only two areas explicitly considering the supply chains of companies, namely Article 8 European bonds and small and mid-cap European equities. Also, Article 8 sectors look cleaner when adjusted for revenue, while Article 9 sectors are cleaner in absolute emissions than revenue adjusted.

Neill Blanks, Managing Director at Mainstreet Partners, said, “2023 was a challenging year for asset managers on many fronts, including responding to regulatory changes in Sustainable Investing, such as the FCA’s recently released Sustainable Disclosure Requirements (SDR). We introduced an SDR synopsis in this year’s ESG Barometer, covering the key implications for asset managers, such as marketing, use of data, type of fund, being compliant in time to gain the desired fund label. In helping asset managers to anticipate the needs of investors, we urge them to look beyond company operational sustainability to understand how companies play into global ecosystems. This can provide clarity on supply chain resilience or exposure to ESG-related issues, as well as identify companies with business models that challenge the status quo. It is through actions like this that asset managers can meet their regulatory obligations, and – importantly – identify and avoid allegations of Greenwashing.”