AMF: Article 8 & 6 differences "rarely significant"

AMF, Article 9, France, French, Article 6, Article 8There is little difference between Article 8 and Article 6 bond funds in the French market when it comes to exposure to fossil fuels, according to research by the French regulator.

Classifications introduced by the European Sustainable Finance Disclosure Regulation (SFDR) to help prevent greenwashing mean Article 8 offerings should have a greater focus on sustainability than Article 6 products.

But that is not the case in the specific area of exposure to the fossil fuel industry in France, according to a study of 10,616 funds by the Autorité des marchés financiers (AMF).

The funds analysed had a combined asset under management total of €1.9 trillion at the end of 2021. However, the AMF acknowledges that the data is now two years old and some of the funds have been reclassified.

The study aimed to find out whether funds that claim to promote environmental or social characteristics - or even that display a sustainable investment objective - are less exposed to coal or oil and gas than others. When it comes to equity funds, the research seemed to confirm "greater exposure of Article 6 funds to the coal sector".

But with bond funds, the difference in exposure between Article 8 and Article 6 offerings was "at best insignificant and at worst frequently positive and significant".

The report said the differences are "rarely significant" in the statistical sense of the term, including when companies’ commitment to transition plans is taken into account.

“Therefore, the application of SFDR in its current state can create a gap between the expectations expressed by investors and the reality of practices, justifying the introduction of minimum criteria for financial products displaying ambitions in terms of sustainability.”

This is the latest development in the ongoing criticism of SFDR. In January, the Securities Market and Stakeholder Group (SMSG) urged Esma to reclassify the Article 8 and 9 labels due to numerous overlaps.

The following month, the European Fund and Asset Management Association recommended that Esma delay its upcoming ESG fund-naming guidance, which is based on SFDR classifications.

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