French finance regulator Autorité des Marchés Financiers (AMF) has outlined four product categories it would like to see under a revamped Sustainable Finance Disclosure Regulation (SFDR).
In a position paper on Europe’s flagship sustainable finance regulation, the AMF called for an “objective, clear and simple product categorisation system” to replace the current framework.
The four categories include ‘Environmental Solutions’, ‘Social Solutions’, ‘Climate Transition’ and ‘Non-Financial Filters’ which would see the existing categories Article 6, Article 8 and Article 9 removed.
The addition of the ‘Social Solutions’ and ‘Non-Financial Filters’ categories would be a slight divergence from current suggested frameworks.
It suggested the non-financial analysis should cover at least 90% of the product’s portfolio, with the weight of ‘E’, ‘S’ and ‘G’, each representing at least 20% of the rating.
The regulator said the four categories should rely on “objective minimum criteria” and “leave no room for interpretation”.
“Rather than attempting to design labels of excellence for top-of-the-crop ESG financial products, the establishment of an EU categorisation system should seek to create wide-ranging categories with criteria that act as entry points,” the AMF said.
“Within such categories, financial market participants would be free to develop more ambitious strategies and practices, but because there may be multiple sustainable strategies that do not necessarily lend themselves to a simple ranking, there should be no hierarchy between categories.”
It added products could still make sustainability-related claims without belonging to a category but “only in their regulatory documents and in a proportionate manner”.
It comes following the European Commission launched a review of the framework last September and follows many national regulators in calling for a rewriting of the framework.
Most asset managers have also supported a new categorisation system including industry body the European Fund and Asset Management Association (EFAMA).
However, this put is at odds with some of its members such as BNP Paribas Asset Management, which backed a revamping of the current framework by creating sub-categories under Articles 8 and 9.
