Transparent ESG investing and reporting is now a major consideration for fund selectors in the investment industry.
With increased scrutiny on what should be labelled ‘ESG’, fund manufacturers are now under more pressure to provide transparent fund documentation to substantiate sustainably focused funds. For example, the Sustainable Finance Disclosure Regulation (SFDR) was introduced to increase transparency in the market and has affected the way that fund managers conduct themselves when it comes to ESG fund disclosures in Europe.
SFDR has become a de facto classification system, with funds classifying themselves as Article 6, 8, or 9 depending on their level of sustainability:
- Article 6 funds are traditional funds, which may or may not take sustainability risks into account in the investment process.
- Article 8 are those funds where they are marketed as ESG but don’t have to invest in only ESG/sustainable companies.
- Article 9 are funds that must have a sustainable objective and must only invest in businesses deemed to be sustainable.
SFDR Level 2, introduced on 1 January 2023, delivered prescribed disclosure templates for Article 8 and 9 funds, including the minimum percentage to be invested with an environmental or a social objective. This increased regulatory scrutiny prompted some fund managers to reclassify many Article 9 funds as Article 8 in fear of regulatory action.
This has brought to the fore, the risk of ‘Greenwashing’, where fund managers intentionally or unintentionally exaggerate a funds' ESG commitments and credentials.
With these evolving and ever-changing regulations, and the multitude of ESG ratings and definitions in the market, it can be a challenge for fund selectors to assess investment suitability for sustainable funds.
Supporting fund selectors
To support fund selectors in this process we’ve introduced new filters in Trustnet, the UK’s leading fund research and selection site. Visitors will now be able to filter by SFDR Article on our Price and Performance page, enabling you to view and further evaluate the ESG credentials of a particular fund at the point of investment research.
This update allows the 10,000 investment professionals who visit Trustnet every day to filter their search based on Article 6, Article 8 and Article 9 funds.
The addition of this filter not only allows investors to narrow their search based on their SFDR classifications but it also provides more visibility to ESG funds in the market. Fund Managers can ensure their ESG funds are easily discovered and distinguishable by their SFDR product type. Trustnet users are able to filter out funds that may exaggerate their ESG credentials in their narrative.
FE fundinfo can help you enhance your ESG fund marketing. With a subscription to Trustnet, you can increase the visibility of your funds with over 2 million factsheet views and over 83 million page views (2022), showcasing your fund’s credentials and benefiting from targeted advertisement around your fund’s homepage.