EU clarifies SFDR categories

Article 9, SFDRThe European Commission has issued amendments to the Sustainable Finance Disclosure Regulation (SFDR) to clarify the classification of investment products as Article 8 or Article 9 funds.

Financial Services Commissioner, Mairead McGuinness, published the amendments to provide guidance and reduce uncertainty regarding sustainable investments.

The amendments state that the SFDR does not prescribe a single methodology for sustainable investments and that Article 8 and Article 9 funds are two distinct product categories, with Article 9 funds needing to have "sustainable investment" as their objective. 

Asset managers can include investments for specific purposes, such as hedging or liquidity, but must comply with the overall aim of the rules to 'do no significant harm' to the environment.

In a statement, McGuinness said: "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." 

The Securities Market and Stakeholder Group argued that there was too much overlap between Article 8 and Article 9 funds, leading to uncertainty and incorrect labelling of funds.

Lombard Odier Investment Management was among many asset managers to downgrade funds from Article 9 to Article 8 due to this overlap.

In February, the French regulator AMF criticised SFDR and urged European policymakers to create a benchmark for Article 8 and Article 9 products.

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