An Association of the Luxembourg Fund Industry report shows that Europe now accounts for 85% of global sustainable funds worth EUR 2.2 trillion.

The third edition of the European Sustainable Investment Funds Study produced by ALFI in partnership with Morningstar and Tameo also shows that sustainable fund net assets grew by 20.2% in 2023.

Global net assets in sustainable funds reached EUR 2.6 trillion by the end of 2023, an increase of EUR 1.5 trillion since 2019. After growth in 2020 (42%) and 2021 (88%), growth slowed to 3% in 2022. Momentum returned in 2023, with net assets growing by 19%.

Other key findings of the study were:

• New fund launches decline: 350 new sustainable funds were launched in 2023, down from 616 in 2022 and 760 in 2021. In addition, the reclassification of funds was almost neutral, 251 funds reclassified as sustainable while 237 funds reclassified as conventional investment funds.

• Passive strategies continue to gain momentum: Demand for passive strategies in European sustainable funds continued to rise in 2023, with their market share growing from 21% of net assets in 2021 to 29% by the end of 2023. Passive strategies also saw a growth rate of 38.8%, significantly outpacing the 14% growth of active strategies, a trend also observed in conventional funds.

• 5 key players continue to dominate: Compared to conventional funds, the sustainable funds market is more concentrated, with the top five investment managers accounting for 26% of the total net assets of sustainable funds, versus 21% for the top five in conventional funds.

• Article 8 funds dominate: 58% of funds are classified as Article 8 funds, while 4% are Article 9. These figures remained unchanged in 2022. Article 6 funds, meanwhile, represent 39% of sustainable funds, up 1% from 2022.

• Sustainable ETFs gain slightly larger market share than conventional funds: For the first time, sustainable funds have a greater market share of ETFs than conventional funds – 15% versus 14%.

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