HUNDREDS OF EUROPEAN ESG FUNDS MAY BE FACING DOWNGRADES
Asset managers across Europe may have to reclassify hundreds of environmental, social and governance (ESG) funds in the coming months. Bloomberg reported that reviews by researchers, including Morningstar, show that only a small fraction of funds registered as Article 9 - the European Union's strictest ESG category - actually lives up to the level of sustainable investments required under European rules. Lawyers advising the industry are now warning that many fund managers may have little choice but to change their official ESG designations, which could have adverse effects for investors and their advisors, who believed they were investing in funds that make ESG a priority. It has long been reported, however, that there is not enough quantifiable data being put out by companies and service providers that fund managers can use to make a reasonable assessment of ESG compliance.
The IIAC will be monitoring developments on this closely through its Asset Management and Capital Markets ESG Committees and will provide guidance to its members as appropriate.