EU moves to clarify ‘sustainable’ investments after fund downgrades

The European Union’s executive body sought on Friday to clarify how investment products can be sold as “sustainable” to investors after asset managers downgraded many of their funds due to uncertainty over the rules.

Financial services commissioner Mairead McGuinness published amendments to the European Commission’s guidance on how to interpret the bloc’s sustainable finance disclosures regulation (SFDR), a core plank of EU efforts to reach a net zero economy.

“The application of the SFDR requirements represents a challenge to industry and regulators and these Q&As aim to offer guidance to facilitate the proper implementation of the rules,” McGuinness said in a statement.

“In parallel, we will continue our comprehensive assessment of the SFDR with a focus on ensuring legal certainty, increased usability and the mitigation of greenwashing. A public consultation is planned for the autumn.”

Asset managers have downgraded funds holding a total of 175 billion euros ($193 billion) of assets from the SFDR’s highest sustainability classification, known as Article 9, to the broader, less demanding Article 8 label, which requires sustainability to be only one of the factors informing investment decisions.

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