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Asset managers that just reclassified hundreds of ESG funds should expect to have to explain themselves to their regulators and investors, according to lawyers advising the industry.

The warning follows the recent redesignation of about 700 funds in the EU to a category known as Article 8, which is seen as offering some environmental, social and governance attributes. The fund class has mushroomed since its introduction in March last year to now make up roughly half the total domiciled in the EU, or $3.8 trillion, analysts at Morningstar Inc. estimate.

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