On February 13th 2023, the French AMF (Autorité des Marchés Financiers) released some recommendations for the likely upcoming revision of Sustainable Finance Disclosure Regulation (SFDR). It is one of the cornerstones of EU legislation on sustainable finance.
SFDR regulation
This regulation defines the reporting obligations for financial entities on both themselves and the products they distribute. On the latter, it has broken the investment funds in different categories. Reference is made to them together with the various articles of the regulations. Article 8 refers to products promoting environmental or social characteristics. Article 9 considers products that have sustainable investment as their objective.
Since its release, the SFDR regulation has acted as a major reference point for investors. They have perceived it as a quality label by these investors. This evolution has created two main issues:
- Firstly, there are already many labels for green funds existing in Europe. Between ISR, Finansol and Greenfin. France only has 3 different labels to qualify sustainable funds. There are more than 10 labels for sustainable funds across Europe. The new labeling created by SFDR has only added to the preexisting confusion.
- Secondly and more importantly, neither article 8 or article 9 sets specified criteria in terms of type of investments or types of companies in which the asset managers must invest.
AMF recommendations
This is what the recommendations of the AMF are looking into. The AMF suggests that the European Commission introduces minimum criteria.
The asset managers would have to follow these criteria for their funds to be compliant with article 8 or 9.
AMF talks about environmental criteria as a first step. These would need to be aligned with the taxonomy. It does not exclude adding other types of criteria later on. In addition, the investment process should be ESG compliant. The more restrictive approach for article 9 funds versus article 8 funds would remain. The article 9 classification would also exclude investment in fossil fuels.
The AMF recommendations obviously go in the right direction. In a way they are only catching up with the reality perceived by investors. But if amending the SFDR along the lines suggested by the AMF goes in the right direction, it is not enough. A single European label for green fund should emerge. It should include strict investment criteria. If not, the life of sustainable retail investors will remain difficult.
A perfect fit for the AMF recommendations
At Neuroprofiler, we take into account the AMF recommendations on SFDR. We make investors better understand sustainable finance through our financial education tool. We are also helping them to better define their real ESG objectives through our sustainability preferences profiling tool.
If you are looking for more information about our solutions, we are happy to answer your questions. Send us a message, and request a demonstration of our solutions directly.