Over 1,500 Article 9 funds are at risk of losing their designation, according to an analysis of European ESG Templates (EETs) data received by FE fundinfo.

Of the 6,000 Article 9 fund EETs that FE fundinfo received as of the end of August, the vast majority of funds had left the minimum investment in sustainable investment blank, while 663 set a minimum level of 0%, and another 780 between 0.1% and 85% in sustainable investments. 

79 Article 9 funds reported to have 100% as the minimum investment in sustainable investments, with a further 168 setting a minimum of 90%. 

In June, the EU financial regulators reminded asset management firms of last year's ruling from the European Commission that Article 9 products "should only make sustainable investments".

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FE fundinfo noted that although regulators said that Article 9 funds may actually contain other investments "for certain specific purposes such as hedging or liquidity", it needed consist almost entirely of sustainable investments.

"Even if it is assumed that all of those Article 9 funds with no stated minimum in sustainable investments will end up with close to 100% when they update their prospectus and populate the field, that still means that at least 1,500 funds might need to review their Article 9 status," the FE fundinfo analysts said. 

"It will be interesting to see which way this goes - will Article 9 funds tighten up the investment criteria or will groups start to reclassify funds as Article 8, which have no minimum requirement for sustainable investment?"

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FE fundinfo received EETs for over 94,000 share classes or products from 287 providers as of the end of August. Of those 94,000, there are an almost equal number of Article 6 (42,400) and Article 8 (42,000) share classes, as well as 6,000 Article 9 funds.

The European ESG Templates were created back in March as part of the latest amendments to the European Union's MiFID II regulations.  

The EET aims to facilitate the standardisation of ESG data for all products marketed in the EU to fund distribution channels so that the distributors can evaluate the end client sustainability preferences.

The template is made up of a total of 580 mandatory, conditional and optional fields, with additional country-specific requirements.