The Impact Commission of France Invest, a federation of 56 asset management companies with nearly €12.5 billion under management, in partnership with AXA Climate, has published a report* on the SFDR classification practices of impact funds and the links between regulatory obligations under Article 9 of the SFDR and the impact investment philosophy.
Why this document?
This report is a tool for raising awareness among impact funds, their investors and public authorities. It is based on feedback from the members of France Invest’s Impact Commission, providing a basis for discussions on changes to the SFDR.
A generic regulatory framework that masks major differences between funds
The gradual introduction of the European Plan for Sustainable Finance, and in particular the SFDR regulation, has considerably strengthened the consistency of the extra-financial information disclosed by financial players. The growth in the number of ‘Article 9’ funds demonstrates the desire of some investors to make their financial products more sustainable.
Nevertheless, the SFDR’s approach is not prescriptive, which leaves room for interpretation on how to comply with the obligations. Different levels of maturity can be observed on the market, with Article 9 funds actually differing greatly in their approach to sustainability (investment in solutions, in innovative or transforming companies, etc., with varying degrees of ambition).
The consultation launched by the European Commission in autumn 2023 showed a consensus on the need to have categories at European level to better understand the reality of funds and their investment philosophy. Simple transparency of ESG information is widely considered insufficient.
And what about impact?
Impact funds may have felt ‘sucked in’ by overly generic regulations.With a very broad definition of sustainability, based on the interpretation of investors, how can their specific characteristics be promoted? How can we make the most of the work that goes into selecting, supporting and evaluating the companies in our portfolios, in order to create a tangible impact?
The purpose of this document is to take stock of the differences and similarities between the Article 9 status and the impact investment philosophy, in order to better promote the specific features of this type of investment.
Beyond impact, regenerative potential
At AXA Climate, we are committed to the emergence of regenerative businesses that are inspired by the principles of life and respect the planet’s limits. Beyond the impact of a solution or service, we believe that working on a company’s regenerative potential in terms of culture and business model enables it to multiply its positive impact in social and environmental terms.
We are convinced that beyond impact analysis, we need to assess the potential of companies to integrate the principles of life and planetary limits into their strategy and operations, in order to regenerate or restore the natural, social and economic resources that they use or impact.
And in the future, we need to be able to promote these ‘regenerative’ companies within a regulatory framework that does not yet take these specific features into account.
*In May 2024, new guidelines on fund names were published by ESMA (European Securities Market Authorities). They provide precise requirements on the minimum practices expected of asset managers, both in terms of the proportion of assets that contribute to generating impact and the intentionality of impact creation, in order to be able to use the term impact to designate the fund.
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