We believe sustainability is a crucial factor for investing in emerging markets. Many countries are developing rapidly, but slow-moving key performance indicators and poor data coverage can fail to capture inflection points.
We initially adopted a cautious approach to the sustainability classification of our emerging markets funds. Regulatory expectations under Europe's Sustainability Finance Disclosure Regulation (SFDR) for sovereign funds were unclear – we therefore opted to position the funds as Article 6 (having no formal sustainability scope).
With the improvement in data and evolution of market standards since then, we have begun a process to align our flagship emerging markets funds with Article 8 reporting requirements (funds that promote environmental and social characteristics). We started by reclassifying our Emerging Markets Sovereign Bond strategy as Article 8 effective September 2025. This combines with evident client interest in Article 8 fund classification.
Why Article 8 is an important fund category
Data on recent fund launches shows that sustainable fund categories remain front of mind for many investors despite increased noise around the term ESG. When including funds labelled Article 9, the data shows significant launch activity.
For example, in the first quarter of 2025, Article 8 and Article 9 funds together accounted for 58% of funds launched in the EU, with Article 8 funds accounting for 139 of these and Article 9 funds accounting for 10. A sign of the success of this category is that Article 8 funds now account for 55% of assets under management in funds available for sale in the EU.
Read the rest of the article in our Emerging Markets Watchlist from Allianz Global Investors.
