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.
