Sustainable Investment Funds in Europe Braced for Mass Upgrades

The sustainable investment funds industry in Europe is predicted to experience mass upgrades, leading to potential greenwashing accusations. Funds recently downgraded may move back up due to a clarification issued by the European Commission in April. More than 300 Article 9 funds were downgraded to Article 8, and €99 billion ($1.09 trillion) of ESG funds were downgraded to Article 8 in the first month of 2023. The confusion is due to contradictory messaging, and some analysts say the new guidance may add to existing confusion. Investors will have to conduct more due diligence to understand the methodologies used.