Robeco, The Investments Engineers

Sustainable Investing

Sustainable investing funds

Sustainable investing funds are products that can verifiably claim to pursue a clear and widely acknowledged sustainability objective, such as lowering the carbon footprint of constituents, investing in technology that assists with tackling climate change, or supporting the circular economy. They now account for a significant proportion of all global assets under management.


The ongoing debate about what actually constitutes a sustainable fund has brought much clearer but tighter definitions of the term ‘sustainability’ from regulators. The move aims to address industry-wide misleading of the public through greenwashing – claiming that a fund is sustainable by making token gestures, such as the exclusion of a tobacco company, and doing little else.

In June 2024, the European Securities and Markets Authority (ESMA) published new guidelines which set out clear definitions and thresholds for funds claiming the sustainability label. It followed the introduction of the EU’s Sustainable Finance Disclosure Regulation (SFDR) which in 2021 had classified funds according to their levels of sustainable intent for the first time.

ESMA thresholds

Under the ESMA guidelines, funds using sustainability-related terms should have 80% of their investments in securities that meet clear environmental or social characteristics, or sustainable investment objectives.1 They must exclude investments in companies that are not part of the EU’s Paris Aligned Benchmarks, such as all oil and gas producers, and commit to invest meaningfully in sustainable investments. The phrase ‘meaningfully’ was not quantified, however.

Funds that use ‘transition’ or other ESG-related terms should also have 80% of their investments in securities that meet environmental or social characteristics, or sustainable investment objectives, and exclude investments according to the EU’s Climate Transition Benchmark, while the investments need to be on a clear and measurable pathway toward net zero.

In the UK, similar regulation under the Sustainability Disclosure Requirements (SDR) published three distinct sustainable investment labels (SILs). 2They said funds can be labelled as:

  • Sustainability focus: Funds with at least 70% of its assets in securities that meet verifiable ESG criteria, where the remaining 30% do not conflict with the goals of those identified as eligible.

  • Sustainability improvers: Funds that don’t currently meet ESG standards but are on pathways to invest more in companies that can do so. Asset managers using this label must identify the period of time by which the assets can meet the standards, including short and medium-term targets.

  • Sustainability impact: Funds that aim to make measurable contributions to environmental or social results, and which are prepared to divest non-compliant securities.


Article 6, 8 and 9

The SFDR lists three categories under which funds can be classified. Labeling a fund as Article 6 means it does not claim to integrate any kind of sustainability into the investment process. Article 8 applies where a fund does promote its ESG characteristics, while Article 9 covers funds which have sustainable investment as a core objective.

Under Article 8, the integration of ESG factors into an investment process – which is now widespread across the asset management industry – may not necessarily go far enough to be called sustainable under the ESMA guidelines. A fund could integrate ESG factors but then continue to invest in unsustainable industries such as oil and gas, if they don’t want to miss out on returns, and so this would fall foul of the definition.

Article 9 funds directly investing in clear sustainability objectives such as renewable energy and the technology behind it, or in issues such as biodiversity, healthy living or the Sustainable Development Goals, would qualify as being sustainable investing funds, with little argument.

The categorization under SFDR is focused on transparency and less on prescribing sustainability requirements, which is why the ESMA naming guidance has been put into place.

Robeco’s Article 9 fund range

Robeco offers 18 Article 9 funds representing 12% of all assets under management and markets them as being sustainable investing funds. The full list is shown below and is also available online:

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