Nearly a quarter (23%) of all Article 8 funds remain at risk of greenwashing, ESG and sustainability data provider MainStreet Partners has found.
The company’s 2025 ESG and Sustainable Barometer report, which analyses over 9,500 investment strategies managed by more than 460 asset managers, also revealed that the proportion of Article 9 funds that have a greenwashing risk has reduced over time – now sitting at 3%.
MainStreet’s research also found that 13% of funds have failed its regulatory adherence assessment – which considers the relevant naming convention of the specific strategy together with the consistency of documentation, that it is clear and not misleading and uses fitting and targeted language.
The report, which evaluates key ESG and Sustainability related trends in the European and UK fund markets, also highlights a clear downward trend in asset manager ratings across each Sustainable Finance Disclosure Regulation (SFDR) classification and non-EU ratings.
The findings come at a time when sustainability standards and expectations have increased, as well as a pullback of several asset managers from key initiatives like the Net Zero Asset Managers initiative and Climate Action 100+, alongside a general reluctance to discuss ESG and Sustainability in the US.
Neill Blanks, Managing Director at MainStreet, said: “At the start of 2024, you may have been forgiven for thinking we would see less regulatory complexity than in the past three years. Unfortunately, that was far from the case, not least as fund naming rules came into effect on both sides of the Atlantic. Regulatory scrutiny continues to intensify, with the threat of fines being imposed for those that do not adapt, on top of the associated reputational damage.
“As markets continue to adapt to new frameworks, we expect to see a broader range of ESG and Sustainable investment products. These products will have clear and specific key performance indicators linked to the fund’s ESG and Sustainable approach, allowing investors to better understand the intentions of the strategy, and most importantly help reduce the risk of greenwashing. With clear regulatory expectations and evolving industry best practices, investors should have more confidence in the integrity of Sustainable investment.”
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