Asset Managers Are Facing Hundreds of ESG Fund Downgrades (2)

Asset managers across Europe may have to reclassify hundreds of ESG funds in the coming months.

Reviews by researchers including Morningstar Inc. show that only a small fraction of funds registered as Article 9 -- the EU’s strictest ESG category -- actually lives up to the level of sustainable investments required under European rules.

Lawyers advising the industry are now warning that many fund managers may have little choice but to change their official ESG designations. The upshot is that clients who thought they’d signed up for the EU’s cleanest ESG product suddenly are left with something else.

“I can ...