French regulator Autorité des Marchés Financiers (AMF) has called on European policymakers to create a benchmark for Article 8 and Article 9 products under the Sustainable Finance Disclosure Regulation (SFDR).
Article 9 funds should exclude investments in fossil fuel activities that are not aligned with the European Taxonomy, the French regulator has argued.
But fossil fuel-linked investments would be possible for Article 8 products under the proposals, provided they meet strict conditions.
The AMF said current SFDR rules and guidance does not impose minimum requirements and does not define the concept of sustainable investment, heightening the risk of greenwashing.
“Consequently, the current Article 8 and Article 9 classification does not aim to assess the nature or extent of the manager’s commitment to sustainability,” the AMF said in a statement.
It said it is “necessary” to take action to avoid ambiguity and better meet the expectations of savers and called on the European Commission to introduce minimum criteria concerning environmental impacts for financial products.
“Such an initiative does not necessarily mean a reversal of the broader ambition of the transparency regime, which covers all of the ESG criteria. As a first step, and given the European sustainable finance agenda, it could be targeted at the environmental dimension,” the regulator said.
Financial market participants managing Article 8 and 9 funds should adopt a binding ESG approach in their investment decision-making process, the AMF suggested, adding that the EU framework for minimum criteria should identify a set of acceptable ESG approaches that can be implemented by financial players.
Marie-Anne Barbat-Layani, chair of the AMF, discussed the proposal with EU Commissioner Mairead McGuinness on February 9, 2023.
“The AMF wants to make a constructive contribution to a new phase of European regulation on sustainable finance,” Barbat-Layani said.
The AMF also proposes to introduce the concept of transition and engagement policies, having identified possible avenues for a quantitative definition of assets in transition.
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