A reminder of the history
Those readers interested in ESG investing will know that the EU has for some years now had rules for classifying funds in terms of their likely qualification as having sustainable investment objectives.
Following their introduction there was rush of funds that perhaps thought having the ‘right’ label would increase sales, but following some push back against greenwashing the number in the Article 8 and Article 9 funds has reduced and new rules (from ESMA, so EU applicable, but given that many funds in the UK are also marketed in Europe, they will impact UK funds) are about to be implemented and they are likely to thin that number down significantly, according to Morningstar.
All this is timely progress in having credible signposting and sustainability auditing for investors, not easily shuffled around by marketing departments intent on green washing and bypassed by fund managers wanting to sneak in non-qualifying assets that they think will boost performance rankings.
You will also recall that the UK, inevitably in the post-Brexit period, decided to have its own rules and undertook the sort of slow process devising the rules that viewers of ‘Yes, Minister’ will have heard expounded by Sir Humphrey many times when asked by Jim Hacker to implement a new policy. Having said that, I personally thought that the UK proposals were better thought out and less likely to be skipped over by the afore-mentioned rogues.
The UK rules, which extend well beyond creating labels for ESG approved funds are generally now known as SDR (Sustainability Disclosure Requirements). There is now evidence that complying with these rules is not such a pushover.
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