Thirty funds disclosing under Articles 8 and 9 of the EU’s sustainable finance disclosure regulation (SFDR) have removed ESG-related terms from their names since the beginning of the year, according to Morningstar.

The firm said it expects more rebranding as asset managers start complying with new guidelines on the use of ESG or sustainability-related terms in fund names.

Published by the EU’s financial markets watchdog in May, the new rules require funds to either comply with new portfolio requirements, or change their name.

Shortly after the rules were released, fintech company Clarity AI published research saying that nearly half of funds making green or impact-related claims in the titles would need to change their names or investments to comply.

In an SFDR market update today, Morningstar said the most common keywords removed by the 30 funds were ‘ESG’ and ‘sustainable’.

While fund renamings may ramp up, SFDR reclassifications are drying up, according to Morningstar – in the second quarter only 53 funds charged the Article with which they were associating, with almost the entirety (52) upgrading from Article 6 to Article 8.

In the second quarter of the year, Article 8 funds netted about €26bn of new money, an increase from the first quarter but paling in comparison with Article 6 fund flows of €107bn in the first half of the year.

Redemptions from Article 9 funds extended to the second quarter, reaching a record level of €6.2bn, after withdrawals of more than €4bn in the first quarter.

Morningstar’s analysis comes as the European Securities and Markets Authority (ESMA) this week published its long-term vision on the functioning of the EU’s sustainable finance framework.

It reiterates the watchdog’s call for the introduction of an official sustainability-oriented fund labelling system and includes a suite of other recommendations, such as that the SFDR’s definition of ‘sustainable investments’ be phased out and that EU Climate Benchmarks should be more “ambitious”.

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Susanna is deputy news editor at IPE. At IPE she covers responsible investment and EU regulation, but also enjoys reporting on developments in and around the UK pensions industry. Having been a financial journalist since 2008, Susanna started her career as a corporate governance/corporate social responsibility analyst at proxy advisory firm PIRC.View full Profile

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