LONDON, Oct 25 Reuters The European sustainable fund industry suffered another quarter of outflows in the three months to endSeptember as investors worried about economic uncertainty and regulatory changes, data provider Morningstar said in a report published Wednesday.

Investors pulled 20.5 billion euros 21.7 billion from funds in the European Union39;s lower sustainability classification, while net inflows into the higher classification were their lowest since early 2021, the Morningstar report said.

Investment funds not marketed as sustainable, by contrast, gathered 17.8 billion euros in inflows in the third quarter, although that was down from the previous three months.

Funds which incorporate environmental, social and governance ESG goals into their mandates, which can range from basic exclusion of certain stocks to only investing in climate technology shares, have had a tough time since a 2021 boom, pressured by better returns elsewhere and regulatory shifts.

In Europe, the introduction of the Sustainable Finance Disclosure Regulation SFDR, which aims to tackle misleading claims from fund houses over their sustainability efforts, has led managers to downgrade hundreds of their funds to a lower sustainability category.

Morningstar said 60 of the redemptions in the third quarter disproportionately affected funds classified as 39;Article 839; under SFDR and which had no commitment to sustainable investments.

Funds in the highest sustainability bucket, known as…