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ESG-oriented AUM to increase by half by 2027 – PwC Luxembourg

Though ‘increased regulatory scrutiny’ has led to decline in Article 9 funds


Pete Carvill

ESG-oriented assets under management (AUM) in the European Union are set to “soar” from €6.2tn to €9.4tn within the next three years, according to a report by PwC Luxembourg.

In Article 8 as a Middle Ground, the firm said current figures indicated assets under management in the EU as a whole reached €10.1tn in 2023. Of this, €6.2ten (61.5%) was in ESG-oriented assets – the great majority (€5.9tn) in Article 8 funds.

PwC Luxembourg also noted the number of funds at the end of last year across the continent totalled 24,010. Of these, 10,481 were Article 8 funds, with a further 963 being classified Article 9.

Split by asset class, the majority at the end of 2023 were equity funds (5,740 Article 8 and Article 9, compared with 4,415 ‘other’ funds), followed by bond (3,353 Article 8 and 9 versus 3,669 ‘other’), and mixed assets (2,120 versus 4,215 ‘other’). The report also found around 97% of ESG funds were actively managed.

“Since the implementation of the SFDR in 2021, there has been an undeniable surge in ESG investments,” wrote the reports authors. “By the end of 2023, the AUM of funds disclosing under Article 8 and Article 9 of the regulation reached an impressive €6.2tn, marking a substantial increase of over €1tn compared to 2022, when the AUM of Article 8 and Article 9 totalled €5.1tn.”

“Our projections indicate that, by 2027, these figures will soar to €9.4tn, demonstrating a CAGR [compound annual growth rate] of 10.9% and representing approximately 75% of the total EU ESG UCITS AUM (up from 61.5% in 2023).”

Increased regulatory scrutiny

It added: “Due to the stringent requirements and increased scrutiny from regulatory authorities, Article 9 funds experienced a slight decline in both AUM and number of funds in 2023. AUM decreased to €312bn in 2023, down from €342bn in 2022, while the number of funds dropped from 979 to 963.”

On the growth of ESG-oriented AUM within the exchange-traded fund (ETF) sector, meanwhile, the report noted: “Despite still representing a minority within the ETF landscape, the collective AUM of Article 8 and Article 9 ETFs exceeded €367bn in 2023. This accounted for 24.4% of the total AUM of EU ETFs, marking a significant increase of 59% compared to 2022. This underscores the growing interest in sustainable investment products within the ETF universe.”