How Europe is driving ESG into the mainstream

How Europe is Driving ESG into the Mainstream

Recent strong inflows across European markets indicate that ESG investing is not declining but evolving into a fundamental investment strategy. While ESG has faced criticism globally, especially in the US where political resistance and fund outflows have raised doubts about investor interest and the reliability of sustainability labels, Europe presents a contrasting scenario.

In Europe, sustainability has become an integral part of portfolio construction, supported by regulatory frameworks, active adviser involvement, and steady investor demand. However, fund flows into sustainable products show a nuanced trend. According to Morningstar, Article 9 funds in Europe saw outflows of €7.9 billion ($9.1 billion) in the first quarter of 2025, mainly due to redemptions in a few equity categories. In contrast, Article 8 funds attracted €52 billion, marking their strongest quarter since 2021.

This pattern does not indicate a withdrawal from ESG but rather reflects a more selective market where investors carefully evaluate product credibility and focus on long-term sustainability.

"Investors are scrutinising products more closely and rewarding those that demonstrate credibility and long-term resilience."

Innovative asset and wealth managers view the shift toward sustainability as an opportunity to enhance clients’ portfolios with new long-term investments rather than simply replacing non-ESG products. Investment into Article 8 and 9 funds is expected to persist despite any extreme political positions.

Author's summary: European ESG investing is maturing, with investors demanding credible sustainable products and driving strong fund inflows despite global uncertainties.

Professional Wealth Management — 2025-11-05

How Europe is Driving ESG into the Mainstream

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