Do Your Investments Fall into Article 6, 8, or 9 of the SFDR?

The 27th Conference of the Parties to the United Nations Framework Convention on Climate Change, better known as "COP27" is being held in Egypt from 6th to the 18th of November 2022. According to the United Nations: ‘Heads of State, ministers, and negotiators, along with climate activists, mayors, civil society representatives and CEOs are meeting in the Egyptian coastal city of Sharm el-Sheikh for the largest annual gathering on climate action."

Many important issues surrounding the climate emergency are due to be discussed at COP27. From reducing greenhouse gas emissions to adapting to the inevitable impacts of climate change, delegates will be seeking to deliver solutions as well as financial commitments to help developing countries meet their targets.

While most of us will be unable to attend, it is important to keep in mind ethical and moral obligations when considering our own impact on climate change. At Monnet Capital we believe these obligations extend to our investment decisions. After all, why would we knowingly lend our money to businesses that are not aligned with the future of our planet, our children and those who come after us? Surely it is incumbent upon us to correlate our investments with events such as COP27; and take in to consideration the environmental and social issues of our time.

In short our investments should be “ethical”...

The Problem with Ethical Investing

As an investment strategy ethical investing is somewhat of an ideal. And like many other ideals, ethical investment practices come with their own potential pitfalls. It is notoriously difficult, for example, to know definitively that a company in which we intend to invest has truly "Green" credentials. This is because, on the face of it, a company may appear to tick all of the required boxes, when in reality false claims about its environmental practices or corporate responsibility may have been made in order for it to appear more environmentally friendly than it actually is.

This is a process known as "Greenwashing".

So is there anything that we can do as investors to verify the Green credentials of companies? The answer could be just a few short months away...

The Sustainable Finance Disclosure Regulation (SFDR)

In January 2023 the EU’s Sustainable Finance Disclosure Regulation is scheduled to come into force. The regulation aims to create greater transparency in the sustainable investment products marketplace. Its aim is to put an end to practices such as Greenwashing and prevent companies claiming that their products are sustainable when oftentimes they are not.

Under SFDR designations, an investment product will be classified as being consistent with Articles 6, 8 or 9.

• Article 6 covers funds which do not integrate any kind of sustainability into the investment process and could include stocks currently excluded by ESG funds such as tobacco companies or thermal coal producers.
• Article 8 (aka Environmental & Socially Promoting) will apply “where a financial product promotes, among other characteristics, environmental or social characteristics, or a combination of those characteristics, provided that the companies in which the investments are made follow good governance practices.”
• Article 9 (aka Products Targeting Sustainable Investments) covers products targeting bespoke sustainable investments and applies “where a financial product has sustainable investment as its objective and an index has been designated as a reference benchmark.”

‘Action indeed is the sole medium of expression for ethics’ - Jane Addams 1907

Let Monnet Capital Help...

If you are an investor who wishes to follow moral and social codes and in so doing, make a difference to the environment, Monnet Capital can guide you through the intricacies of ethical and ESG (Environmental, Social, and Governance) investing.

Start your journey today by talking to a Monnet Capital consultant and look forward to creating an investment portfolio that is aligned with real ethical values and principles.

Complete the form at the end of this page and contact us NOW

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