Demystifying Article 8 Funds: Why an ESG Collection Category Matters
- An inclusive “ESG Collection” category can enhance market transparency and accommodate investors’ diverse sustainability approaches — provided it's backed by robust criteria and clear disclosures.
- Our analysis of over 14,000 Article 8 funds shows the vast majority (94%) have explicit environmental or social criteria, suggesting potential greenwashing risks in a broader category are limited to a small minority of funds.
- Overly narrow fund categories risk excluding emerging sustainability approaches — potentially stifling product innovation, investor choice, and the evolution of sustainability integration.
The ongoing review of the EU’s Sustainable Finance Disclosure Regulation (SFDR) includes a potential new fund-categorization system, building on the current Article 8 and 9 regime. Article 8 funds promote environmental or social characteristics, while Article 9 funds go further with sustainable investments as their objective. Funds would be categorized based on their sustainability strategy: the categories under discussion are “Sustainable,” “Transition” and “ESG Collection.”1 This last category is aimed at a broader range of strategies that incorporate some level of environmental or social considerations in their investment approach, akin to Article 8 funds. However, concerns about a similar “catch-all” approach have raised questions around greenwashing risks for this proposed category.2
We examined Article 8 funds (over 14,000 of them with USD 14.1 trillion in assets under management (AUM), as of June 15, 2025), to assess whether perceived concerns are substantiated, and, if so, to what extent. We found that the overwhelming majority of funds disclose environmental or social considerations. Our analysis suggests that an inclusive category — anchored on transparent disclosures — could accommodate diverse strategies reflecting investors’ preferences, support product innovation and reflect the evolving nature of sustainability integration.
Our review reveals a varied landscape of Article 8 funds incorporating environmental or social considerations, including themes not strictly linked with the SFDR’s sustainable investment (SI) definition, broad strategies with committed allocations to SI, best-in-class selection, exclusions or engagement. While a small subset of funds — 3.3% by number (1.8% in AUM) — show no clear or explicit ESG-related strategy, the vast majority do, albeit with different approaches and levels of ambition.3
Data as of June 15, 2025. Includes 14,126 Article 8 funds. Funds are considered in a hierarchy, where if a fund meets the first sub-category, it is no longer counted in the succeeding sub-categories. Source: MSCI ESG Research
Exclusions-based funds make up 44% by number (40% in AUM) and are typically grounded in values-based criteria that often evolve into broader sustainability-related policies. Within this group, 4% (2.6% in AUM) apply limited exclusions — typically controversial weapons or norms violations. Strategies akin to baseline exclusions, such as Climate Transition Benchmark screening, represent 7.5% (5.5% in AUM) and commonly exclude controversial weapons, norms violation, thermal coal or tobacco.4 Combined, these sub-groups total 11.5% (8.1% in AUM), with most adopting focused engagement policies — only 2.9% (0.9% in AUM) do not.
The remaining 32.5% of funds (32% in AUM) apply more substantive screening, often starting with social safeguards such as tobacco and increasingly incorporating environmental criteria. This larger subset reflects how approaches can evolve over time, shaped by institutional learning, investor expectations and regulation.
Data as of June 15, 2025. Includes 6,219 Article 8 funds with an exclusions-based approach. Source: MSCI ESG Research
Article 8 funds pursue their investment objectives through different approaches, motivations and levels of ambition, without conforming to a single model of integration. A broad category such as ESG Collection would reflect the realities of the current fund landscape. In total, the number of Article 8 funds without explicit environmental or social considerations, along with those applying only limited screening or baseline exclusions, without related engagement policies, makes up 6.2% of the Article 8 universe, representing only 2.7% of AUM.
The diversity within Article 8 funds reflects the varying levels of adoption of sustainability-related strategies — from basic exclusions rooted in responsible investment to structured policies with targeted outcomes. This mirrors how investors have historically adopted sustainability indexes, evolving from broad indexes with limited exclusions to incorporating environmental or social ambitions, as seen in the evolution of the MSCI Sustainability Indexes.5 Significantly narrowing classification risks inadvertently excluding products still developing their sustainability frameworks.
Our findings suggest that an inclusive categorization system would reflect the range of approaches within Article 8 funds. Our analysis also highlights how only a small proportion of funds lack clear or explicit environmental or social considerations, while exclusions-only strategies may include funds in the early stages of their sustainability journey. Enabling this progression could support investor choice, learnings and product innovation. Backed by robust disclosures, this category could enhance market transparency and help investors navigate a diverse and evolving funds landscape.
Funds and the European Sustainable Finance Landscape 2024
We evaluate European funds’ performance under sustainability regulations, including SFDR article 8 and 9 funds, EU Taxonomy alignment and new fund-naming guidelines, offering insights into regulatory developments and data improvements.
Evolution of Fund Naming Calls for Deeper, Data-Driven Sustainability Insights
With ESMA’s fund-naming guidelines coming into effect in May, sustainability-related fund names are declining while transition-themed funds are growing. Data-driven insights will be key to navigating and understanding underlying sustainability attributes.
MSCI Sustainability Solutions
MSCI’s sustainability data, models, ratings and metrics enable you to better manage risk and identify opportunity.
1 Sustainable category: products contributing to an environmental or social objective and not investing in harmful assets. Transition category: products mainly investing in transitioning assets or implementing a transition strategy at portfolio level (and minimum safeguards). ESG Collection category as proposed by the Platform of Sustainable Finance in the report, “Categorisation of products under the SFDR: Proposal of the Platform on Sustainable Finance,” Dec. 17, 2024.
2 Robert Van Egghen, “SFDR review sparks division over 'ESG light' category,” Ignites Europe, June 4, 2025.
3 Based on an investment product failing to meet one or more of the following criteria, using fund prospectus and regulatory disclosures: i) considers ESG criteria in their security-selection and portfolio-construction process, ii) invests in ESG/sustainability themes, iii) has 10% minimum committed sustainable investments as per Article 2(17), iv) applies ESG-related exclusions, v) has an ESG engagement policy.
4 Climate Transition Benchmarks under the EU Regulation 2019/2089 of the European Parliament and of the Council of 27 November 2019 amending Regulation (EU) 2016/1011 with regards to EU Climate Transition Benchmarks, EU Paris-aligned Benchmarks and sustainability-related disclosures for benchmarks. Here specifically referenced as the minimum exclusions requirement by ESMA on fund naming guidelines for social, governance or transition terms, referring to Controversial Weapons, Tobacco and UNGC/OECD (norms) violation.
5 Further details on MSCI Index consultations can be found here, including an example of how MSCI ESG indexes evolved over time.
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