One in four (23%) of all article 8 funds remain at risk of greenwashing, according to a new report.

Article 8 funds are those who are considered to be promoting environmental and social objectives under SFDR rules.

The number of article 9 funds (funds with a primary sustainable investment objective) that have greenwashing risk has reduced to 3%.

Over one in ten (13%) of funds analysed by sustainability data provider Mainstreet Partners failed its regulatory adherence assessment. The assessment considers the relevant naming convention of the specific strategy together with the consistency of documentation, that it is clear and not misleading and uses fitting and targeted language.

The report also found that breaches of the Carbon Transitional Benchmark exclusions surged to 49%.

Neill Blanks, managing director at Mainstreet Partners, said regulatory scrutiny continues to intensify, with the threat of fines being imposed for those that do not adapt.

He said that investors should begin to have more confidence in the integrity of sustainable investments.

He said: “As markets continue to adapt to new frameworks, we expect to see a broader range of ESG and sustainable investment products. These products will have clear and specific key performance indicators linked to the fund's ESG and sustainable approach, allowing investors to better understand the intentions of the strategy, and most importantly help reduce the risk of greenwashing. With clear regulatory expectations and evolving industry best practices, investors should have more confidence in the integrity of sustainable investment.”

Mainstreet Partners’ 2025 ESG and Sustainable Barometer report analysed over 9,500 investment strategies managed by over 460 asset managers.