The latest changes to the European Sustainable Finance Disclosure Regulation (SFDR) have resulted in a downgrade for many funds regarding sustainability disclosure within six months. At the same time, the proportion of sustainable investments held by funds designated as “dark green” under Article 9 of the SFDR has increased. The SFDR, which aims to improve the sustainability credentials of financial products and thereby prevent greenwashing, has thus become significantly more accurate since its introduction in March 2021.
These are the key findings of a recent analysis by economists and lawyers at the Leibniz Institute for Financial Research SAFE using data from WM Group, a leading provider of financial information and data, on more than 10,000 mutual funds and 2,000 index funds. Banks in Germany offered these funds between September 2022 and March 2023. Based on the data, SAFE researchers examined the development of the disclosure of sustainability information according to the SFDR and evaluated the current status.
Figure: Transition of investment funds between the SFDR categories

The figure shows the number of investment funds per SFDR category for four dates and their transitions between the dates for the sample of funds. Source: WM Gruppe data, own calculations.
More transparency for sustainable data
“We see the classification of funds into SFDR classes changing over time, with many downgrades from Article 9 to Article 8 funds in the first quarter of 2023, especially for index funds,” says Loriana Pelizzon, Director of SAFE’s Financial Markets Research Department. According to the SFDR, Article 8 classifies so-called “light green” financial products that advertise, among other things, environmental or social features or a combination of these features. Article 9 classifies “dark green” financial products that seek sustainable investments.
The SAFE analysis also shows that the share of sustainable investments for the group of Article 8 funds remained constant between 37 and 39 percent over time. For Article 9 funds, this share increased to 84 percent in March 2023. “We also observe that gradually more funds are reporting their share of sustainable investments. While this may lead to different sustainability shares, it will provide more transparency in the market,” Pelizzon adds.
The SFDR requirements are subject to ongoing monitoring and evaluation by the regulators, resulting in clarifications and amendments to the regulation. These measures most recently included regulatory technical standards for the SFDR, which have been in effect since the beginning of 2023 and specify the content, methodology, and presentation of sustainability disclosures at the company and product levels. “Judging by our results, namely downgrades from Article 9 to Article 8 funds and a higher share of sustainable investments in the Article 9 group, we conclude that the recent additions and clarifications to the SFDR have indeed raised the profile of the SFDR classifications and increased their accuracy,” adds legal scholar Nikolai Badenhoop of SAFE’s Law & Finance Research Cluster.
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Scientific Contacts

Prof. Loriana Pelizzon, Ph.D.
Deputy Scientific Director, Director Department Financial Markets
