Around green investment funds, a lot of legal ambiguity that contributes to “greenwashing”

“We must have a guarantee that this green finance is not ‘greening’.” » This was the ambition of Economy Minister Bruno Le Maire in his speech on climate issues on March 10, 2021. On the same day, a new European regulation for better transparency on “sustainable” targets came into force. Investment funds under the Sustainable Finance Disclosure Regulation (SFDR).

A year and a half later, confusion reigns primarily in the ESG investment sector (for “environmental, social and governance” criteria). Almost half fall short of expected levels of green investment, survey commissioned by Investigative Sites reveals Follow the money and Investor with dozens of media partners, including the world. Suspected of misleading investors, many asset managers question the regulatory framework, which is too rigid and imprecise. Right or wrong?

Categories are falsely labeled

The ambition of the SFDR regulation was to make investment funds more transparent by creating three categories of investments:

• The classic joints, defined by Article 6 of the Regulation;
• who support environmental and/or social characteristics (known as “Article 8”);
• who purpose Sustainable Investment (known as “Article 9”), also called “Super Green” in our research.

However, this is by no means a label approved by the European authorities, as it is asset managers who choose which category to classify their funds into without prior verification. Instead, they are simply obliged to publish more information about how they manage their funds – the more ambitious the category, the greater the transparency restrictions. “Although they are not quality labels, the SFDR categories are perceived as such “However, notes Philippe Surlas, Deputy Director of the Financial Markets Authority (AMF), the French police of the sector.

Many “super green” funds do not meet the standards

In detail, the level of claims is still relatively modest for the so-called “Article 8” funds, which are unanimously described by sector observers as “captive”. We can maintain a fund that selects assets according to their social characteristics (equality between women and men, consideration of disabilities, social dialogue, etc.), without any effort at the environmental level. This mix of investments with very different objectives is also one of the criticisms of ESG funds.