Putting the EU Taxonomy to work
Allocating capital for a sustainable future
Companies use the EU Taxonomy to demonstrate the sustainability of the business to investors, who use Taxonomy and other ESG data to develop sustainable finance investment products, such as SFDR Article 8 and 9 funds.
SFDR Article 8 and 9 funds accounted for 60% of assets under management (AUM) in the EU at the end of the Q1 2024. This is an increase from 54% of assets at the end of Q1 2023.
In absolute terms, the AUM associated with Article 8 and 9 funds increased by $1.26 trillion over that period
Approximately half of SFDR Article 8 and 9 funds report on their taxonomy alignment. The average alignment of Article 9 funds, at 6%, is four times higher than of Article 8 funds.
Only a small number of Article 8 funds use the EU Taxonomy in their sustainable investment framework, for instance by setting a minimum alignment threshold. Adoption of the EU Taxonomy is greater among Article 9 funds, although the average minimum threshold for revenue alignment is a relatively modest 2.8%.
The taxonomy alignment of investment portfolios should receive a boost in 2024 as asset managers take into account the 2023 disclosures by non-financial firms who reported for the first time their alignment to climate objectives.
The EU has become increasingly efficient: economic output has increased while emissions have declined over the past 30 years, resulting in a doubling of GDP per tonne of carbon.
Investors can speed up the decoupling of GDP and greenhouse gases (GHGs) by allocating capital to sustainable firms.
The EU Taxonomy facilitates this by providing certainty on the sustainability performance of companies.
