A little more than half of all Belgian public funds consist of sustainable assets or invest sustainably. These are the findings of a study conducted by the FSMA on the occasion of the introduction of the Sustainable Finance Disclosure Regulation (SFDR).
The European Regulation on sustainability-related disclosures in the financial services sector, better known as the SFDR, entered into force on 10 March 2021. The Regulation seeks to ensure that managers of investment funds do not greenwash their products, presenting them as more sustainable than they really are.
This is why the SFDR imposes transparency obligations on managers of undertakings for collective investment (UCIs) as regards the sustainability of their investments. In particular, they must disclose how they have integrated environmental, social and governance (ESG) objectives into their investment policy. They must include this information in the prospectuses for their funds and compartments.
Based on that information, the SFDR distinguishes among three main categories of funds. Article 9 covers funds that have sustainable investment as their objective. The category of funds with sustainable characteristics is covered in Article 8. Funds without sustainable characteristics or sustainable objectives have to comply only with Article 6 of the SFDR.
The FSMA examined how managers apply the new Regulation. As at 21 May 2021, the FSMA held data from 706 funds and their compartments. They represent more than 95 per cent of all Belgian public UCIs.
Their breakdown into SFDR categories based on the number of funds is as follows:
- Article 6: 68 per cent;
- Article 8: 25 per cent;
- Article 9: 3 per cent.
Their breakdown into SFDR categories based on the assets invested is as follows:
- Article 6: 46 per cent;
- Article 8: 50 per cent;
- Article 9: 4 per cent.
The total assets invested by the funds and compartments in the study amount to 187 billion euro. A little over half of that, or 100 billion euro, belongs to the Article 8 and Article 9 categories and have ESG characteristics or are sustainably invested.
Between the end of February 2020 and the end of May 2021, the funds and compartments covered by Articles 8 and 9 saw considerable growth. Net subscriptions in the category of Article 8 rose by 15 billion euro (+22 per cent). Net subscriptions in the category of Article 9 rose by 3 billion euro (+85.5 per cent). The funds and compartments covered by Article 6 saw net redemptions totalling 6 billion euro (-7 per cent).
“The new European legislation offers investors the possibility of devoting more attention, when taking investment decisions, to the sustainability of their investments,” observed the Chairman of the FSMA, Jean-Paul Servais. “The FSMA’s research indicates that the sector has rapidly adapted to the new Sustainable Finance Disclosure Regulation and that investors are more interested in investments with sustainability characteristics.”