Investment flows into funds that focus on transitioning companies from ‘brown’ to ‘green’ technologies have nearly doubled those into purely environmental funds in the EU over the past two years, the European Securities and Markets Authority (ESMA) has reported.
According to ESG Today, this marked shift indicates a growing investor interest in supporting businesses moving towards greener practices rather than only investing in those that are already environmentally friendly.
In its recent Trends, Risks and Vulnerabilities (TRV) report, ESMA highlighted the critical need for both public and private sector financing to meet the EU Green Deal goals and to aid the broader green transformation of the economy.
Despite a promising increase in sustainable investment over recent years, current political tensions in the U.S. and increased scrutiny towards ESG investments have somewhat stifled the momentum, raising concerns about the future availability of private capital for these initiatives.
2023 saw a stabilization in ESG investment growth, with investor enthusiasm for sustainable products showing little change in early 2024. Notably, Article 9 funds experienced net outflows amounting to €9.4bn in the first half of 2024, while Article 8 funds attracted €50bn in net inflows during the same period.
Meanwhile, although still a smaller segment, transition-focused funds, which invest specifically in sectors and firms committed to moving towards greener operations, have gathered significant investor interest. These funds, currently managing assets worth €39bn, have seen net inflows that nearly double those of their green counterparts, which manage €260bn.
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