. Article 9: products having a sustainable investment objective 3. This means that financial market participants must draw up in 2022 the respective periodic reports in compliance with the SFDR. Article 6 funds do not integrate any kind of sustainability considerations into the investment process. The Sustainable Finance Disclosure Regulation (SFDR) seeks to enhance sustainability-related disclosures by imposing requirements on financial market participants (e.g. The following funds have been classified as Article 9 products under the SFDR, having sustainable investment as their investment objective: Liontrust GF Sustainable Future European Corporate Bond Fund Sustainable Investment Objective All Triodos IM funds available for investors have sustainable investments as their objective as set out in article 9 of SFDR. Under SFDR Fidelity International (FIL) is required to categorise its products under Article 6, Article 8 and Article 9. ARTICLE 9 CLASSIFICATION It has been determined that the Fund meets the criteria in Article 9 of SFDR to qualify as a financial product which has sustainable investment as its objective and has prepared this Characteristics Card to make the associated disclosures as considered further in section 2 above. •This deck lays out a proposed mapping to key Article 6, 8, and 9 distinctions, which in a fund's prospectus) and disclosure statements on their websites about which of their products fall into three distinct categories. Investor Notices T. Rowe Price Funds SICAV SFDR Article 9 Fund Disclosure. The big question: Article 8 or Article 9? The EU's Sustainable Finance Disclosure Regulation (SFDR) requires asset managers to disclose information about the ESG risks in their portfolios, and how they address them. Four fund companies with SFDR funds have . 529 mutual fund products (including active, passive and MMF products), representing €328 billion in assets. Funds classified as article 6 are non-ESG. Funds: AIFs and UCITS Fund Managers: Managers of AIFs and UCITS Art 8 Fund: Fund promoting environmental or social characteristics according to Art 8 SFDR Art 9 Fund: Fund having a sustainable investment objective according to Art 9 SFDR Taxonomy: Regulation (EU) 2020/852 of the European Parliament and of the Council of SFDR Article 8 and Article 9 Disclosures, Investor Notices and Other Documents. SFDR FACTSHEET: SPECIFIC REQUIREMENTS FOR ARTICLE 9 DARK GREEN FUNDS The Sustainable Finance Disclosure Regulation (SFDR) comes into force on the 10th of March 2021. Article 8 can be viewed as a spectrum, ranging from the barest of green products with minimal screening of the underlying investments, to products that perhaps select . Article […] On 10 March, the EU Sustainable Finance Disclosures Regulation took effect, requiring for the first time For more information, please reach out through your preferred client service contact. Compliance with the remainder of the rules as set out in the regulatory technical standards (many of which are due to be published by the end of 2021) has been delayed by six months to 1 July 2022. Compliance with the remainder of the rules as set out in the regulatory technical standards (many of which are due to be published by the end of 2021) has been delayed by six months to 1 July 2022. 21 - entity level disclosures (Article 4 SFDR); and - product level disclosures (Article 7 SFDR). Article 6 covers funds that are not Article 8 or 9, however sustainability may still be part of the portfolio manager's process, e.g. The big question: Article 8 or Article 9? As mentioned earlier, the average risk scores for Article 8 and 9 funds are very similar, but vary slightly on an investment style level. SFDR requires fund managers to categorise their funds between Article 6 (not having a specific ESG investment objective), Article 8 ('light green') and Article 9 ('dark green'). Article 8 funds promote environmental, social and governance characteristics. Among other duties, Article 6 of the SFDR includes obligations on financial market participants and financial advisers to disclose in the pre-contractual information regarding the financial product information on the impacts on sustainability risk in the performance of their activities and on the . The SFDR requires fund managers, such as those operating as alternative investment fund managers (AIFMs), to disclose how they have integrated in their processes, including in their due diligence, an assessment of all relevant sustainability risks that might have a material negative impact on the financial return of a fund investment . From 10th March 2021, a new regulation on sustainability-related disclosures in the financial services sector will apply to all EU market participants, including the WHEB Sustainable Impact Fund. 8) and Sustainable Investment-products (Art. Current AUM in these funds is €2.98 trillion. The AIF has "sustainable investment" as its objective and an index has been designated as a reference benchmark. From 10 March 2021, funds came under one of three categories: article 6, 8 or 9. 1. The SFDR RTS will come into force on January 1 2022. SFDR Factsheet: New ESG Disclosure Requirements. (Article 9 (1)) 2. "Lack of uniform standards may open the doors to instances of greenwashing. SFDR: Four Months After Its Introduction Article 8 and 9 Funds in Review Executive Summary . The rest fall within Article 9 and have an environmental objective. These are: Article 9 funds: those funds that specifically have sustainable goals as their objective (for example investing in companies . FUNDS UNDER THE ARTICLE 9 The funds under Article 9 of the SFDR regulation are products with the objective of sustainable investments. The EC's Q&A provides helpful clarification on several issues, although some of the answers are somewhat inscrutable. Article 8 and Article 9 Fund Launches and Upgrades; The Largest Article 8 and Article 9 Funds; Get the Report Transparency is our policy . The most visible and impactful aspect of SFDR is the classification of funds and mandates into three categories, as laid out by Articles 8 and 9 of the SFDR and those funds not defined by either article, referred to as 'neutral' funds. All financial entities who sell products into the EU have to classify the products they manufacture or advise on into three categories: Products with a sustainable investment objective (Article 9) Products promoting environmental or social . The EC's Q&A provides helpful clarification on several issues, although some of the answers are somewhat inscrutable. 9 August 2021. Initially, larger firms were also able to use the opt out, but this option fell away on 30 June 2021. In responses to questions from the industry around how to define Article 8 last month, the European Commission said . The new Sustainable Finance Disclosure Regulation 1 (SFDR) introduced various disclosure-related requirements for financial market participants and financial advisors at entity, service and product level. SFDR brings new ESG disclosure rules for asset managers. In terms of the latter, the SFDR distinguishes between genuinely "sustainable investments" (Article 9 of the SFDR) and investments that merely promote the ESG characteristics of an investment (Article 8 of the SFDR). This website uses cookies. The Taxonomy Regulation makes certain amendments to the SFDR in relation to the pre-contractual and periodic reporting requirements for Article 8 AIFs/portfolios and Article 9 AIFs/portfolios where they invest in an economic activity that contributes to one or more of the environmental objectives set out in the Taxonomy Regulation. 2 The PAI obligation operates on a 'comply or explain' basis from March 2021, unless a PE firm has more than 500 employees or is a so-called 'qualifying parent undertaking' (per Article 3(7) of Directive 2013/34/EU), in which case it will . Changes made to the prospectus of the Select Investment Series III SICAV. Article 4 of the draft RTS prescribes a template format for this entity-level "Adverse sustainability impacts statement". Article 10 - Transparency on products which promote environmental or social characteristics or have sustainable investment as their objective. In brief, ESG-focussed funds are those which (i) have sustainable investment as an objective (known as "SFDR Article 9" or "dark green" funds) or (ii) promote environmental or social sustainability (known as "SFDR Article 8" or "light green" funds). Active management largely dominates the post- SFDR ESG fund landscape. Article 6 covers funds which do not integrate any kind of sustainability into the investment process and could include stocks currently excluded by ESG funds such as . Articles 5 of the Taxonomy Regulation interfaces with Article 9 of the SFDR and adds taxonomy-specific pre-contractual and . asset managers and investment advisers) and financial products (e.g. Level 1 SFDR, which came into force on 10 March, requires asset managers to publish both pre-contractual statements (e.g. View Amundi's SFDR Retail Brochure. A list of each Article 8 Fund together with the information referenced above in respect of that Article 8 Fund; 2. (Article 9). It came into force in December 2019 and certain key provisions are expected to apply from March 2021 onward. . The list identifies the FIL funds registered or passported in Ireland which FIL has identified and will self-certify to the relevant regulator as being Article 8 funds. When you need to make meaningful like-for-like comparisons across funds that share characteristics, Refinitiv Lipper is the answer. This is subject to an "opt out" for smaller firms, as discussed below. Article 9 - Transparency of sustainable investments in pre‐contractual disclosures. Coverage of funds classified according to one of two key articles in the EU sustainable finance disclosure regulation (SFDR) is uneven across Europe, Efama has reported on the basis of a market survey. The binding elements concerning the way in which sustainability risks are integrated into the product's investment decisions/advice are specified in the fund prospectus. The first stage of SFDR implementation was on 10 March 2021. Periodic reporting requirements for Article 8 and Article 9 products apply from 1 January 2022. Article 4 of the draft RTS prescribes a template format for this entity-level "Adverse sustainability impacts statement". Article 9 funds have sustainable investment as their objective. The SFDR has quite nuanced definitions for these terms and we can help you analyse whether your . SFDR requires Article 8 Funds and Article 9 Funds to make enhanced disclosures in pre-contractual documentation and on websites. The "vague" definition of what constitutes an Article 8 fund under the Sustainable Finance Disclosure Regulation (SFDR) is leading to market concerns the directive could increase the risk of greenwashing. An analysis of the funds of the 14 firms that replied shows some Article 8 products have limited . The survey is the first time that the European asset management trade body collected data on so-called Article 8 and Article 9 funds. Article 4 of the SFDR requires (on a "comply or explain" basis) for an asset manager's websites to communicate its policies for diligencing the adverse impacts of its investment decisions on sustainability factors. I am an asset manager with 30 funds, 20 of which fall within Article 6 SFDR only. Among other duties, Article 6 of the SFDR includes obligations on financial market participants and financial advisers to disclose in the pre-contractual information regarding the financial product information on the impacts on sustainability risk in the performance of their activities and on the . "Once more, you will end up with multiple sub-sets of Article 9 funds without uniformity and without the ability to adequately compare funds under the SFDR classification system, things could get confusing fast," Whelan continued. The following document sets out the requirements of the Articles 8 and 9 of SFDR and describes where detailed information can be found as required under Article 10 of the SFDR as at March 10 . . We are now working towards having the majority of the assets in that range classified in this way later this year." Schroders SFDR Event: Sustainability for Everyone The Ethical Council is a body operated jointly by four Swedish national pension funds - AP1, AP2, AP3 and AP4 (known as the AP funds). In terms of the RTS, for Article 9 SFDR products, the ESAs suggest that the pre-contractual . SFDR imposes new transparency obligations and periodic reporting requirements on investment management firms at both a product and . Article 10 of the SFDR states that an asset manager of Article 8 or 9 funds should also publish and maintain on its website additional information regarding the methodologies used to assess, measure, and monitor the environmental or social characteristics or the impact of the sustainable investments selected for the fund, including its data . The vast majority of Article 8 and 9 funds are actively managed, Morningstar found, with passive funds accounting for just 11% and 10% of assets respectively. 7-minute read The Sustainable Finance Disclosure Regulation (SFDR) is one of the key pillars of the European Commission's 2018 Sustainable Finance legislative package. Article 9 funds make impactful investments and have specific Sustainable Investment Objectives (Downing Renewables and Infrastructure Trust is an Article 9 Fund) Article 8 funds are those that promote ESG characteristics; Article 6 applies to all funds not otherwise categorised under Articles 8 or 9 Reuters asked 20 of the biggest fund houses for a list of products they market as Article 8 or 9. of Fund launches/repositionings in Europe we expect to be Article 8 or 9 in 2021. Under the new classifications, products are labelled as either Article 6, 8 or 9 under SFDR. Pre-contractual disclosures can be found in the relevant fund pages accessed via the gam.com fund list. Passive funds account for only 11% of assets in Article 8 and 9 funds, half the market share for passive funds in the overall European fund universe. SFDR Article 8 and Article 9 Funds: Q3 2021 in Review . Funds). 9), to be used pursuant to the . The Disclosure Regulation (EU) 2019/2088 ("SFDR") became applicable on 10 March 2021.. From that date, investment fund managers ("IFMs") must publish ESG-related information on their website.They must also ensure that ESG information is provided (i) in the prospectus (for UCITS) and in disclosures to investors (for AIFs), and, depending on whether the fund promotes ESG characteristics or . •Apart from the disclosure requirements, funds promoted as ESG are required to classify as being Article 8 or 9 products, depending on whether they meet the requirements for either classification, with Article 9 taking on more restrictive criteria. The AIF has "sustainable investment" as its objective and no index has been designated as a reference benchmark. SFDR ARTICLE 8 & 9 PRODUCT DISCLOSURE SFDR - GEN - M113 - 2021-03 SFIS may, under normal market conditions, and for portfolio management reasons (including risk management reasons), hold a portion of its total investments in instruments which are not classified as either Article 8 or 9 under SFDR, as well as cash. There have been some concerns about private funds making public website disclosures pursuant to Article 10 SFDR in relation to Article 8 and Article 9 products. "When SFDR became effective in March 2021, Schroders had almost 30% of the assets in our main Luxembourg fund range classified under Article 8 and 9. - For all your Article 6 and 8 funds, ignore . Three fall within Article 9 SFDR because they have a social objective. D. Article 8 funds (sometimes referred to as "light green funds") are funds which promote, among other This article will focus on the impact the SFDR (including the draft RTS and the Taxonomy Regulation) may have on non-EU AIFMs and on non-EU delegates of EU-AIFMs located . 3. Article 9 investment products are products that focus specifically on achieving a sustainability goal. - For all your Article 6 and 8 funds, ignore . of funds launched and repositioned in Europe last year were article 8 or 9. of active flows and 38% of index flows went into today's Article 8 or 9 funds in 2020 for funds in scope under SFDR. made by what are often referred to as "Article 8 funds" and "Article 9 funds". Changes made to the prospectus of the T. Rowe Price Funds SICAV. The SFDR fund categories: Article 6, Article 8 and Article 9. Article 9 Funds or "Dark Green Funds" The third part of our Sustainable Finance Disclosure Regulation ("SFDR") series focuses on requirements for Article 9 Funds by providing a scope, market overview, timeline and more for this group of funds under SFDR. On 21 September 2020, the European Supervisory Authorities (EBA, EIOPA and ESMA - ESAs) published a consultation package seeking public feedback on presentational aspects (the layout) of product templates for ESG-products (Art. of the Article 9 fund (or its umbrella fund) and in the periodic reports of the Article 9 fund (or its umbrella fund) in order to comply with the requirements of the Disclosure Regulation. The most visible and impactful element in the new SFDR regulation is the classification of funds and mandates in three categories, as laid out by Articles 6, 8 and 9 of the SFDR. of a larger Article 9 SFDR category, and Article 8 SFDR products which make sustainable investments with an environmental objective a subset of a larger Article 8 SFDR category of products which make sustainable investments. Article 4 of the SFDR requires (on a "comply or explain" basis) for an asset manager's websites to communicate its policies for diligencing the adverse impacts of its investment decisions on sustainability factors. Sustainable Finance Disclosure Regulation (SFDR), sets standards for classifying funds or products as "grey" Article 6, "light green" Article 8 or "dark green" Article 9, with each level of classification having different product documentation and marketing materials, with strict reporting requirements for "green" funds. 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