The topic of Climate Change and the effect that this is having on our lives on a world wide basis has become more topical with every passing day . Governments and the General Public have become more and more focused on the impact that various industries are having on our environment with every passing day. and this has now come firmly into focus in where investors are investing their money .
When choosing where you wish to invest your funds, how focused are you on investing in funds that are focused firmly on companies who adhere to strong sustainability targets
It is vitally important that Investors make their preferences and requirements know to advisors, and it is now a requirement for advisors to inquire and clearly record Investors Preferences and requirements when providing investment advice.
Investors do also need to be aware and understand that choosing Sustainable Investment Options can limit the type and range of funds available to them and it can impact the risk / reward profile of the funds that are available – it may not always be possible to to match your Risk /Reward Profile with your personal S.F.D.R. requirements.
These new rules have onerous consequences for asset managers throughout the world as investment firms are required to demonstrate how serious they are about sustainability. They will also influence the decisions of listed companies, which in turn will find themselves compelled to focus more on ESG issues or risk losing out on investor capital, the life blood of their business.
Under the S.F.D.R, the all European funds across asset classes from bonds to equities and alternatives are being classified by managers into one of three categories – Article 6, Article 8 or Article 9 – based on the product’s sustainability objectives, and all funds will be required to provide some E.S.G disclosure (Article 6), while Article 8 and Article 9 funds will be asked to provide more detailed E.S.G. information to investors.
The S.F.D.R. also introduces the principle of ‘do no significant harm’. This principle considers an investment to be ‘sustainable’ if it contributes to an environmental or social objective and does not significantly harm any other environmental or social objective as set out in the Regulation.
| Article 6 – |
| Article 8 – |
| Article 9 – |
|No integration of |
|Promotes, environme-ntal or social character-istics, or a combination but is not a main focus||Investment in econ- omic activity that contributes to environ-mental objective.|
|Can include stocks that |
are excluded from ESG
funds, such as tobacco and coal producers and should be clearly labell-ed as non-sustainable
|Fund manager may be required to track an EU climate transit-ion benchmark|
|“Do no significant harm”|
Fitzgerald Life and Pensions are Regulated by the Central Bank of Ireland