“The just transition cannot take place without the social dimension”

Dor almost eighteen months, the European regulation on sustainability disclosures in the financial services sector (Sustainable Finance Disclosure Regulation, SFDR) entered into force, introducing new transparency and information obligations.

While the first statements from financial players must be communicated before June 30, the Financial Markets Authority (AMF) published a proposal on February 10 to strengthen the environmental requirements of this regulation.

Exclusion of fossil fuels, mandatory alignment of a portion of funds with the green taxonomy, more precise definition of sustainable investment… The players in social impact finance gathered in the FAIR* collective are delighted that our regulatory authority has committed to combating greenwashing. However, in this proposal, an essential dimension is conspicuous by its absence: the social.

For several months, financial market players have been seeking to bring their funds into compliance with the various categories of this regulation and, for some, are looking for the Holy Grail of Article 9, the most demanding category which concerns products claiming an objective of sustainable investment for 100% of their assets.

In order to clarify the requirements of this article 9, the European Commission published in April 2022 a “delegated regulation” to determine the fifty indicators relating to the taking into account or not of the main negative impacts (PAI) in terms of sustainability.

Criteria that are not precise and binding enough

Following this clarification, a large number of managers chose to downgrade their products: the assets of European funds covered by this article 9 shrunk by more than 175 billion euros at the end of last year. This episode testifies to the confusion that the strengthening of transparency requirements causes in the financial sector and indirectly among savers.

While these indicators have the merit of enhancing information and transparency on financial products, the AMF, as it points out in its position paper, considers that the minimum environmental criteria are currently not precise and binding enough. If we can only welcome the intention to allow investors to easily identify the most sustainable products, we can regret that the AMF relies only on the objective criteria existing on the environmental pillar alone.

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