EU ESG UCITS AuM Set to Reach Over €9tn by 2027; Luxembourg Remains EU Leader

On Tuesday 9 April 2024, PwC Luxembourg published the fifth edition of its ESG UCITS posters which highlight the evolution of environmental, social and governance (ESG) funds across the European Union.

Investment flows towards EU ESG UCITS funds surged last year. Article 8 and Article 9 funds reached €6.2 trillion at the end of 2023, an increase of €1 trillion year-on-year, and assets under management (AuM) are now projected to reach over €9 trillion by 2027, according to the latest ESG data from PwC Luxembourg.

Also according to "EU ESG UCITS - Article 8 as a Middle Ground?", Luxembourg remains the leading domicile for ESG UCITS funds in the EU, with 45.7% of the total AuM of Article 8 funds and 60.8% of the total AuM of Article 9 funds, while Amundi had the greatest number of Article 8 funds compared to other asset managers.

Other key findings included:

- Top asset managers by AuM of Article 8 funds: BlackRock maintained its leading position among asset managers with respect to Article 8 UCITS AuM (€432.6 billion), followed by JPMorgan (€333.3 billion) and Amundi (€321.9 billion)

- Top asset managers by AuM of Article 9 funds: Pictet topped the list with AuM of €25 billion in its Article 9 funds, followed closely by Handelsbanken (€24.8 billion) and Candriam (€23.9 billion)

- Top EU ESG funds domiciles by AuM: Luxembourg was by far the leading domicile in ESG funds in the EU with 45.7% of the total AuM of Article 8 funds and 60.8% of the total AuM of Article 9 funds. Luxembourg was followed by Ireland, France and Sweden

- Top asset managers by number of Article 8 funds: Amundi continued to lead on the number of Article 8 funds (521), followed by BNP Paribas (278) and DWS (261)

- Top asset managers by number of Article 9 funds: With 30 Article 9 funds, Candriam was in the lead, followed by Mirova (24) and BNP Paribas (21)

- Active/passive split by number of Article 8 and 9 funds: Among the Article 8 funds, 9,373 were actively managed while 1,108 were passively managed as of the end of 2023. As for Article 9 funds, 869 were actively managed while 94 were passively managed - a slight decrease compared to 2022

- Top EU ESG UCITS by net flows: Among Article 8 funds, Morgan Stanley’s USD Liquidity Fund took the lead in attracting net flows (€9.3 billion), followed by State Street’s USD Liquidity LVNAV (€8.7 billion). For Article 9 funds, Handelsbanken's Global Index Criteria took first place with €1.6 billion, followed by Candriam's Sustainable Bond Euro Corporate with €0.8 billion in net flows

- Top EU ESG ETFs by net flow: For Article 8 ETFs, JPMorgan's US Research Enhanced Index Equity (ESG) took the first place with €2.1 billion in net flows, followed by DWS' Xtrackers MSCI World ESG UCITS with €1.6 billion. For Article 9 ETFs, Legal & General’s US ESG Exclusions PA topped the charts with €0.9 billion in net flows, followed by JPMorgan’s Carbon Transition Global Equity with €0.7 billion.  

Frédéric Vonner, Partner and Sustainable Finance & Sustainability Leader at PwC Luxembourg, said: "Since the introduction of the Sustainable Finance Disclosure Regulation in 2021, sustainable finance investments have skyrocketed and continue to do so, as evident from the €1 trillion jump we've seen in AuM in Article 8 and Article 9 UCITS funds, reaching €6.2 trillion in end-2023. We do not expect this growth to slow down anytime soon, and now project ESG UCITS AuM in the EU to reach €9.4 trillion by 2027. Our latest data showcases a shift towards more diversified sustainable investment strategies: while equities remain dominant, we see growing interest in Article 8 money market funds and passive options such as Article 8 and Article 9 ETFs which now represent 24.4% of the total AuM of EU ETFs. With the ongoing review of the SFDR, investors can expect even greater clarity and standardisation in the years to come, which may further propel the growth of sustainable investing in the EU."