Over the past decade, the investment fund industry has undergone significant transformation, with major financial players steadily integrating sustainability criteria. “While regulation has been a key driver of this transformation, investor behaviour has also played an important role in this dynamic,” explains Virginie Loisel.
Regulation—particularly SFDR*—primarily aims to enhance transparency for investors. To meet their expectations, especially those seeking to align their investment strategy with “sustainable” values, fund managers have adapted their offering accordingly.
In total, Europe has over 11,000 Article 8 funds and around 1,000 Article 9 funds, with higher transparency requirements.
A major shift
“Today, more than half of UCITS funds in Europe are classified as Article 8* or 9* under SFDR, representing a substantial share of total assets under management,” adds Sofia Souici.
Article 8 funds incorporate ESG criteria, while Article 9 funds pursue a sustainable investment objective in areas such as clean energy development, decarbonisation, climate change mitigation, financial inclusion, access to education and women’s empowerment. “Overall, Europe counts more than 11,000 Article 8 funds and around 1,000 Article 9 funds, for which transparency requirements are higher,” adds Sofia Souici. “In Europe, assets under management in sustainable UCITS funds exceed €7 trillion, which reflects the maturity and depth of ESG integration.”
This momentum can be observed across the entire industry, beyond the sole scope of UCITS funds.
(PwC EU ESG UCITS Poster 2025 ; ALFI – European Sustainable Investment Funds Study 2024).
Luxembourg, a leading domicile for sustainable funds
Luxembourg has fully embraced this transformation. The financial centre is now Europe’s leading domicile for sustainable funds, with nearly 100% growth in the number of Article 8 funds between 2021 and 2024, bringing the total to around 4,500 funds. These funds have continued to attract positive inflows (EFAMA).
Article 9 funds have experienced more moderate growth and even recorded net outflows in 2024, reflecting greater investor caution towards so-called ‘dark green’ strategies.
SFDR requirements for Article 9 funds are particularly stringent, especially regarding the demonstration of measurable sustainability objectives and the alignment of data and reporting.
This has led many asset managers to adopt a more cautious approach; several funds initially classified as Article 9 have been reclassified as Article 8 as methodologies have become more refined (ALFI – European Sustainable Investment Funds Study 2024).
European regulation is now moving towards simplification. The ongoing SFDR review includes a ‘Call for Evidence’ aimed at clarifying key concepts, reducing complexity, and easing administrative constraints. A European Commission proposal was published on 20 November 2025, closely followed by the announcement of the members of the third mandate of the ‘Platform on Sustainable Finance’ in January this year. The goal of the platform is to revise and simplify taxonomy criteria, develop new criteria for other economic activities, gather and leverage stakeholder feedback on existing tools and rules, and advise the Commission on matters related to the EU Taxonomy and the broader sustainable finance framework.
Luxembourg’s success in carving out its position as a leading sustainable fund domicile has been achieved notably thanks to the development of expertise and the existence of an ecosystem of industry players and services capable of supporting this transformation. This applies both to traditional liquid funds and to funds investing in illiquid assets, whose investment frameworks and operational models differ.
Enhanced expertise
While Banque de Luxembourg – Asset Servicing’s depositary activity covers the broader industry, it has nevertheless developed strong expertise in impact and sustainable finance.
“We oversee approximately 480 compartments, of which 125 are classified as Article 8, and 30 as Article 9 (with the latter representing around €6 billion in assets under management),” explains Sofia Souici.
For example, some microfinance funds active in emerging markets often involve larger transaction volumes.
Tailored approaches
Managing an ‘Article 9’ investment vehicle involves multi-level commitments and meeting a range of specific requirements. “For example, certain microfinance funds active in emerging markets often require the processing of higher transaction volumes,” explains Virginie Loisel. “Supporting these types of funds requires highly specialised teams that can step in as and when required, and who are capable of understanding the local contexts in which our clients operate. Over time, we have strengthened our internal resources and deepened our expertise across specific markets, asset classes, and investment structures.”
Responding to the sustainable challenge
In addition to its range of traditional depositary services, Banque de Luxembourg has enhanced its offering with other solutions such as its ‘Technical Assistance Facilities’, addressing the specific needs of several impact funds, particularly in donation management.
Banque de Luxembourg has set up the necessary infrastructure and broadened its areas of expertise in order to support its clients in a constantly-evolving regulatory environment, enabling them to meet numerous applicable requirements. “This also allows us to support clients who wish to embark on a sustainability journey, by helping them integrate responsible investment practices into certain compartments or fund allocations,” adds Sofia Souici.
Banque de Luxembourg has been committed to sustainability for more than 25 years. “A commitment that has been enshrined in our B Corp* certification, obtained in 2023, and which is reflected in the incorporation of environmental, social and governance considerations across the bank and all its activities,” concludes Virginie Loisel.
*SFDR: the Sustainable Finance Disclosure Regulation
*Article 8: funds promoting ESG criteria
*Article 9: funds with a significant sustainable investment objective
*B Corp: a community of businesses committed to a more inclusive, equitable and regenerative economy, combining profit with the general interest.