German assets managed by retail funds and sustainable spezialfonds — funds limited to institutional investors — amounted to € 717 billion in the third quarter of 2022, reported the German Investment Funds Association (BVI).
While fund assets with sustainability features have grown by 7.1% since the beginning of 2022, the conventional fund market in Germany has shrunk by 16.9% amidst covid, war and inflation.
As per the report, net assets for retail funds amounted to €590 billion, while sustainable spezialfonds managed to raise €127 billion. Article 8 funds (with environmental and/or social features) and Article 9 funds (contributing to at least one sustainability objective) comprised 47% of the total retail fund market.
In addition to Sustainable Finance Disclosure Regulation (SFDR) mandates, more product characteristics continue to influence Germany’s fund distribution landscape. These guidelines ensure a minimum proportion of sustainable investments as per the EU taxonomy while also considering the principal adverse impact (PAI) on sustainability objectives in their investment strategy.
Since June end, 5% of the fund assets without sustainability criteria and 90% of existing Article 8 funds have entered the Article 8 plus category. On the other hand, products listed as Article 9 funds have been downgraded, with approximately 40% retaining their status or entering the Article 8 plus funds category.
About 62% of new product features in Article 8 plus funds use a combination of PAI and a minimum share of SDFR-approved sustainable investments. Another 37% of Article 8 funds focus exclusively on considering principal adverse impacts (PAI), says the BVI report.
Compared to Article 8 funds, which should promote environmental or social characteristics and have good governance practices, Article 9 funds are required to positively impact the society or environment through sustainable investment with a non-financial objective at its core. On the other hand, Article 8 plus funds offer a subset of a minimum proportion of taxonomy-aligned investment with a sustainable objective.
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