Beyond the rhetoric: Where is investor appetite for ESG in Europe really landing?

Investor demand for Environmental, Social and Governance (ESG) strategies has transformed dramatically over the past decade, from niche allocation to mainstream expectation. When the EU’s Sustainable Finance Disclosure Regulation (SFDR) first came into force in March 2021, it fundamentally reshaped the ESG landscape for fund managers. Faced with new classification requirements, many managers initially defaulted to Article 6 — the path of least resistance. This allowed them to avoid the additional operational complexity, disclosure obligations and potential investor scrutiny that came with Articles 8 and 9.

However, the dynamics have shifted sharply. Limited partners (LPs) across Europe have increasingly signalled they are willing to commit more capital to Article 8 and 9 funds, viewing these classifications not just as disclosure regimes but as genuine signals of ESG commitment. In response, managers have started to reposition.

SFDR was originally designed as a disclosure framework aimed at improving transparency rather than serving as a formal ESG quality label. Yet in practice, Articles 8 and 9 have become widely adopted by the market as de facto “badges” to communicate ESG ambition and alignment to investors.

Drawing on proprietary SFDR onboarding data from Langham Hall’s teams in Luxembourg and the UK (the latter only where funds are marketed to continental Europe), we see this pivot clearly in private markets. The data, spanning private equity, real estate and infrastructure strategies, shows a sharp rise in Article 8 funds as the pragmatic new default, a marked decline in Article 6, and selective, strategic adoption of Article 9. Together, these shifts reveal where investor ESG appetite in Europe is really landing and what it means for managers positioning themselves for the next decade.

Article 8: The pragmatic new default

Article 8 has quickly emerged as the pragmatic middle ground. In private markets strategies, Article 8 funds have shown the most consistent and significant growth. The proportion of Article 8 funds has steadily increased year on year, reflecting a rising willingness among managers to incorporate ESG characteristics to align with LP expectations.

In private equity, Article 8 funds accounted for around 25% of new onboardings in 2022, over 35% in 2023, and rose further to 40% in 2024. In real estate, Article 8 funds grew from about 25% in 2022 to 64% in 2023, reaching an impressive 91% in 2024.

This growth underscores that Article 8 allows managers to meet increasing ESG demands without committing to the far more operationally intensive Article 9 framework. It offers flexibility, credibility, and a pathway to satisfy LPs actively allocating towards more ESG-aligned vehicles.

Article 6: From fallback to fading

Initially, Article 6 was seen as a safe default classification. It avoided additional reporting complexity and allowed managers to maintain established strategies without structural changes. However, as ESG expectations have become mainstream, Article 6 has steadily lost ground.

In real estate, Article 6 fell from more than half of onboardings in 2022 to only around 9% by 2024. In private equity, Article 6 declined from around 43% in 2022 to 40% in 2024. Infrastructure saw Article 6 dominate early on, but this share is also showing signs of eventual retreat.

This shift reflects a broader reality: ESG is no longer optional or a niche differentiator. It has become a baseline expectation in Europe’s private markets.

Article 9: A selective, high-commitment choice

Article 9 funds, which require sustainable investment as a core objective, remain a relatively small but strategically important segment. In private equity, Article 9 accounted for roughly 29% in 2022, fell to around 13% in 2023 and stabilised at 20% in 2024. In real estate and infrastructure, adoption remains minimal.

This cautious uptake reflects the high bar for operational readiness, rigorous disclosure and impact verification required to credibly support this classification. Article 9 strategies appeal primarily to mission-driven institutional investors, development finance institutions (DFIs) and certain European pension funds that prioritise measurable impact alongside financial returns. Only managers with advanced ESG capabilities, robust internal expertise and a long-term commitment to impact are typically equipped to pursue this path effectively.

Looking ahead: The UK’s evolving approach

While this analysis focuses on SFDR trends in Europe and therefore only touches on UK funds marketed into continental Europe, it is worth noting that the UK is introducing its own Sustainability Disclosure Requirements (SDR), designed to address some of the perceived shortcomings of the EU framework.

Unlike SFDR, which has evolved into a de facto badge system through Articles 6, 8 and 9, SDR explicitly introduces four distinct, descriptive fund labels intended to provide clearer and more practical guidance to investors.

Although SDR is still in its implementation phase and no data is yet available, it is widely viewed as a more robust and transparent framework, aiming to reduce ambiguity and greenwashing risk by offering a direct labelling system rather than relying on market interpretation of disclosure categories.

Implications: Where should managers aim next?

For managers structuring new private markets products, these trends provide a clear strategic signal. Article 6 is no longer a safe fallback; it is increasingly seen as insufficient and risks misalignment with institutional LP expectations.

Article 9, while attractive to certain highly impact-focused investors, demands significant operational investment and a genuine, verifiable sustainability strategy, making it a viable path only for those fully prepared to deliver and report on measurable outcomes.
Article 8 has clearly emerged as the pragmatic sweet spot: robust enough to meet investor ESG demands and regulatory scrutiny, yet operationally achievable across private equity, real estate and infrastructure strategies.

Managers considering Article 8 designations should ensure they have strong governance, clear ESG frameworks, and the internal capability to back up claims with credible data and reporting. Meanwhile, those looking to pursue Article 9 must be ready to demonstrate impact as a core objective, backed by comprehensive verification processes.

As ESG expectations continue to embed deeper into allocation decisions, managers who act decisively to strengthen their ESG positioning (rather than simply adopt labels) will be best placed to secure capital, build stronger LP relationships, and protect long-term reputational value.

A clear pivot: From optional to expected

Taken together, these onboarding trends reveal that ESG integration has moved from being an optional differentiator to an expected baseline. Article 8 is rapidly becoming the default choice for managers balancing ESG requirements with operational realities and investor expectations.

For investors, this data offers a grounded, evidence-based view of the real market trajectory, beyond broad commitments and policy statements. For managers, it is a clear call to action: now is the time to align structure, strategy and operational readiness to capture and retain capital.

At Langham Hall, we see these insights not merely as onboarding statistics but as strategic market intelligence. While frameworks like SFDR have played a critical role in creating a common baseline and shaping market behaviour, simply adopting a category is no longer enough to differentiate or secure investor trust. As ESG shifts from ambition to execution, managers must go beyond the label, investing in strong governance, credible data and transparent reporting, to deliver authentic, measurable and lasting value.