Lombard Odier latest to downgrade Article 9 funds

Lombard Odier Investment Management (LOIM) has become the latest asset manager to downgrade its Sustainable Fund Disclosure Regulation (SFDR) labels.

Nine Article 9 funds – including equity, fixed income and convertible products – have been downgraded to Article 8, the Swiss asset manager said, opting to take a “conservative approach” to its interpretation of the SFDR requirements.

The impacted funds are within Lombard Odier’s suite of CLIC – ‘Circular, Lean Inclusive and Clean’ – thematic strategies.

Five funds within the TargetNetZero range have been downgraded. These are the TargetNetZero Euro IG Corporates fund, TargetNetZero Global IG Corporates fund, TargetNetZero Global Equity fund, TargetNetZero Europe Equity fund and the TargetNetZero Global Convertible Bond fund.

The Climate Transition fund, New Food Systems fund, Natural Capital strategy and Plastic Circularity strategy have also been reclassified.

Lombard Odier said the changes “may prevent the inclusion of more neutrally-positioned investments essential for diversification, or some investments that may make a positive contribution but that may still be in transition.”

The investment manager added: “We continue to adopt a science-based, forward-looking sustainable investment approach for clients. We focus on identifying companies that will provide the sustainability solutions needed within and across sectors, and those companies that can deliver on a circular, lean, inclusive and clean economy.”

The move comes after the Securities Market and Stakeholder Group argued to the European Securities and Markets Authority there is too much overlap between Article 8 and Article 9 funds.

The group claimed too many asset managers are incorrectly using both Article 8 and Article 9 labels for sustainable strategies, as the latter has more specific ESG requirements than the former.

Nearly a quarter of funds classified as Article 9 under SFDR are failing in the regulation’s requirement to do “no significant harm”, according to research by Clarity AI.

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