French regulator recommends stricter SFDR criteria

AMF calls for minimum environmental impact requirements for Article 8 or 9 funds

Article 9 funds should not invest in fossil fuels, French financial regulator the Autorité des marchés financiers (AMF) has said.

The way the Sustainable Finance Disclosure Regulation (SFDR) is being used can be misinterpreted by savers to mean that Article 8 or 9 funds are guaranteed to contribute to a more sustainable European economy, the regulator said last week.

The AMF has therefore made several recommendations to be introduced into European law in order to prevent ambiguity and meet saver expectations, including that Article 9 funds should exclude investments in fossil fuel activities that are not aligned with the European taxonomy. Investment in these activities would, on the other hand, be possible for Article 8 products provided that conditions are met that ensure that these activities are engaged in an orderly transition.

A Morningstar report in January this year found 419 products changing status, including 307 that downgraded from Article 9 to 8, as asset managers prepared for the SFDR level 2 regulatory technical standards deadline, which was 1 January 2023.

The regulator is also calling for the introduction of minimum environmental impact requirements in Article 8 or 9 funds, and said a minimum proportion of the latter’s portfolio assets should align with the taxonomy.

It also recommends financial actors managing Article 8 and 9 funds should adopt a binding ESG approach in their investment decision-making process and said the European framework for minimum criteria should identify a set of acceptable ESG approaches that a financial actor could implement.

“The AMF wishes to make a constructive contribution to a new stage of European regulation on sustainable finance,” said AMF chair Marie-Anne Barbat-Layani (pictured).

These recommendations come a month after the regulator revealed its supervisory priorities for the year, which, like the Financial Conduct Authority in the UK, include a focus on sustainable finance.

Barbat-Layani said this year the AMF will look to improve the regulatory framework for sustainable finance and fight against greenwashing, which includes clarifying the SFDR.

She said the regulator will continue to support listed companies and asset managers in the implementation of key texts on sustainable finance and help prepare for the implementation of the Corporate Sustainability Reporting Directive.

Data quality, training of financial intermediaries and financial education of savers are another important issue in sustainable finance, she said.


Natasha Turner

Natasha is global editor at ESG Clarity, part of the Bonhill Group, and has been a financial journalist for seven years. She has been shortlisted for Story of the Year and Investment Journalist of the...