A quarter of funds downgrade ESG classification
A quarter of the investment funds that still claimed the highest “dark green” sustainability classification under the Sustainable Finance Disclosure Regulation (SFDR) last summer have now been scaled down by their managers. This downgrade is due to rule changes in the SFDR, reclassifying what counts as a top-level ESG fund. Currently, around one-third of the most sustainable Dutch funds have been downgraded.
A quarter of the investment funds that still claimed the highest “dark green” sustainability classification under the Sustainable Finance Disclosure Regulation (SFDR) last summer have now been scaled down by their managers. This downgrade is due to rule changes in the SFDR, reclassifying what counts as a top-level ESG fund. Currently, around one-third of the most sustainable Dutch funds have been downgraded to less sustainable “light green” or “grey” classifications.
Many larger Europeans managers, such as BlackRock, AXA, and BNP Paribas, have also downgraded their funds.
The reclassification efforts were taken by the European Central Bank (ECB) to clarify rules and prevent greenwashing.
However, according to Joost Schmets of the Vereniging Effecten Bezitters (VEB), the reclassifications show that “in principle there has been deception” throughout the financial sector. Schment says “Investors thought they were buying a dark green product, but that appears not to be the case for many.” Yet whether this is misleading or not, he’s hesitant to say. “You then assume that fund providers knew that they could guarantee the sustainability of their fund with their overestimate classification,” he says.
Recent research by Follow the Money, Investico, and nine other European media outlets, including Le Monde and EL País, found that many of Europe’s dark green funds still contained fossil fuel and aviation investments.
