Continued overall inflows and capital appreciation increased the assets under management in funds classified as Article 8 and 9 under the EU’s Sustainable Finance Disclosure Regulation (SFDR) to reach more than $10 trillion at the end of 2025, although global sustainable funds saw net outflows in the year, according to a new “Sustainability Fund Update: 2025 in Review” report released by Morgan Stanley.
Under the SFDR regulation, Article 8 funds include those that promote environmental or social characteristics, while Article 9 funds include sustainable investing as their objective.*
According to the report, Article 8 and 9 AUM increased by 23% $10.2 trillion in 2025. While the funds saw net inflows of around $420 billion during the year, Article 9 funds actually experienced net outflows of $23 billion, offset by more than $55 billion net inflows to Article 8 funds.
By asset class, the report found that Article 8 net inflows were positive across fixed income, money market, equity and allocation, while Article 9 only saw net inflow in fixed income, and equities saw the greatest outflows.
The strong outflows in Article 9 equity funds occurred alongside significant underperformance, with the funds underperforming the broader market by 601 basis points over 2025, while Article 8 equity funds underperformed by a more modest 98 bps, according to Morgan Stanley.
The report also found that the number of Article 8 and 9 funds has continued to increase, but the pace of growth has slowed with 779 new Article 8 funds launched in 2025, compared with 936 in 2024, and 44 Article 9 funds in 2025, falling by nearly half from 85 in 2024.
While SFDR funds experienced positive flows in 2025, the report found that global sustainable funds – based on Morningstar’s definitions of sustainable investment funds, including categories of General ESG Investments and Sustainability Themed Investments – experienced net outflows of $63 billion through the year. Despite the net outflows, however, global sustainable investment AUM increased 17% in 2025, remaining steady at a 6% share of broader market AUM.
*The European Commission has proposed a major update to the SFDR, which would effectively replace the Article 8 and Article 9 classifications with a new simplified categorization system for financial products making ESG claims, based on concerns that the categories were being used as de-facto sustainability labels.
Mark founded ESG Today following a 20 year career in investment management and research. Prior to founding ESG Today, Mark worked at Delaney Capital Management (DCM) in Toronto, Canada, most recently as the firm’s head of U.S. equities. While at DCM, Mark was part of the firm’s ESG team, responsible for evaluating and tracking the sustainability factors impacting portfolio companies, and assessing the suitability of companies for portfolio inclusion. Mark also spent several years in the sell-side research industry, covering the technology and services sectors. Mark holds an MBA from Columbia University in New York, a BBA from the Schulich School of Business at York University in Toronto, and is a CFA charterholder.
