An obligatory ecolabel for sustainable investment funds as recently proposed by European supervisor ESMA can help tackle greenwashing, according to Philippe Zaouati, chief executive officer of Mirova, the French impact asset management boutique.
Mirova, with approximately €40bn in assets under management, is one of a select number of asset managers that only run ‘positive impact’ funds classified as ‘article 9’ under the Sustainable Finance Disclosure Regulation (SFDR).
Downgrades
A large number of funds have recently been reclassified from dark green article 9 (impact) to light green article 8 (ESG integration). A recent Morningstar study showed that 307 funds, or 40% of all article 9 funds, have had such a downgrade since September 2022.
This wave of downgrades has everything to do with the coming into force of level 2 of the SFDR, which compels article 9 funds to report on the impact they realise. This is supposed to make it easier for investors, including pension funds, how impactful these funds really are.
Mirova’s 13 funds have all retained their article 9 classification, but for several of its funds the asset manager has sold 5-10% of the companies it owns.
“We removed some names from the portfolios, mainly banks, consumption-related companies and tech firms. It’s not to say these firms are doing harm, but they don’t have much positive impact either,” Mathilde Dufour, head of sustainability research at Mirova, said at a media conference the firm organised in Paris on Friday.
“Banks are for example still investing a lot in fossil fuels as they finance the whole economy.”
Impact definition
Since 1 January 2023, asset managers have to report on the impact of their investments, but an official definition of impact is still lacking. However, European regulator ESMA is intent to change this.
Last December it opened a consultation for all stakeholders to respond to its proposal to impose an obligation for sustainable-investment funds to invest at least 50% of their assets according to the EU’s green taxonomy.
Zaouati believes a mandatory label can help tackle greenwashing, he told the same Paris conference. “At the moment there is a lot of greenwashing going on,” he said.
“An ecolabel can help to change this, but there is a risk that it would be too strict. Imagine if only a handful of funds were to meet the criteria, the label would be rendered irrelevant,” he added.
The new ecolabel turning out too demanding is not a fallacy, as a study by ESMA showed less than 4% of article 9 funds met the minimum threshold of 50% of investments being taxonomy-aligned.
This is partly due to the taxonomy’s focus on the E of ESG, Zaouati noted.
“A possible solution could be to introduce several labels with different gradations of greenness. In addition, there should also be separate labels for funds that do not target environmental impact,” he said, adding that an avalanche of different labels should be avoided too, so as not to make things overly complicated.
ESMA is planning to provide the European Commission with advice on the ecolabel in the second or third quarter this year.
For the original article, go to Pensioen Pro
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