A new report from PwC Luxembourg has shown the number of ESG funds has continued to grow in 2022, even as the global economy faced uncertainty from the Covid-19 pandemic and the war in Ukraine.
The report, the fourth edition of the “ESG Mutual Funds Poster”, found that the number of ESG funds increased to 10,154 in the second half of 2022, up from 9,279 in the first half of 2022- an increase of 9.5%. The growth was predominantly driven by strong growth in the number of Article 8 funds, the number of Article 9 funds declined slightly, ending 2022 at 979.
In terms of assets under management (AuM), BlackRock emerged as the foremost asset manager for ESG funds, followed by Amundi, DWS, BNP Paribas, and Goldman Sachs. In terms of the number of funds, Amundi was the top asset manager, followed by BNP Paribas, DWS, Eurizon Asset Management, and BlackRock.
The top EU countries by AuM as of end-2022 were Luxembourg, Ireland, France, Sweden, and Germany. For net flows, BlackRock was the top fund in both Article 8 and Article 9 funds.
“In a context of economic and geopolitical turmoil, the number of ESG funds increased to 10,154 in the second half of 2022, carried by strong growth in the number of Article 8 funds which more than made up for the slight reduction in Article 9 funds,” said Frédéric Vonner, partner and sustainable finance & sustainability leader at PwC Luxembourg. “The year saw many Article 9 funds being reclassified to the broader Article 8 category due to regulatory uncertainty.
“As the SFDR and other sustainability-related regulations continue to evolve, and as regulatory authorities refine their approach towards enforcing them, asset managers in the EU will have to continuously adapt to the changing regulatory landscape.”
The report also found the majority of ESG funds reside in Europe, mostly in Luxembourg. This is likely due to the fact that the EU has been a leader in the development of sustainability-related regulations, such as the Sustainable Finance Disclosure Regulation (SFDR).
Earlier this year, research from sustainability tech platform Clarity AI, found that out of 18,000 investment funds across Europe, less than 4% would be able to comply with naming laws for ESG funds across key markets.
Despite this, the growth of ESG funds suggests investors are increasingly interested in companies that have positive ESG practices. This trend is likely to continue in the years to come, as investors become more aware of the risks associated with climate change and other ESG issues.
You can find the full report here.
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