Knowledge Base
Non-Financial Approaches in Asset Management
Methodologies for integrating extra-financial criteria into asset management. Covers exclusion, ESG selection, shareholder engagement, and impact investing strategies.
Skills
Questions
What is the penalty for a foreign fund that does not comply with ESG communication requirements under the AMF?
A foreign fund that does not comply with ESG communication requirements under the AMF must display a warning in highly visible characters alerting investors to the disproportionate communication. This aims to protect investors against greenwashing.
What is the minimum percentage of assets that must be invested according to ESG criteria for a fund using ESG terms in its name under the ESMA guidelines of November 21, 2024?
Under the ESMA guidelines integrated into the AMF doctrine, a fund using ESG terms in its name must invest a minimum of 80% of its assets according to ESG criteria. This ensures that the fund's name genuinely reflects its investment strategy.
What is the consequence for a fund that does not meet the standards of the significantly engaging approach under the AMF doctrine?
If a fund does not meet the standards of the significantly engaging approach, it may not use ESG terms in its name. It is limited to reduced communication or no ESG reference, depending on its actual level of engagement. This aims to prevent greenwashing.
Under the AMF doctrine, what is the minimum ESG analysis threshold required for a fund using a significantly engaging approach?
The AMF doctrine requires that for a significantly engaging approach, the ESG analysis or rating coverage must exceed 90% of the portfolio. This means that the vast majority of the fund's assets must be assessed against ESG criteria to justify central communication.
The mere exclusion of non-cooperative tax jurisdictions constitutes a significant approach within the meaning of the AMF.
Under the AMF doctrine, the mere exclusion of controversial activities or non-cooperative tax jurisdictions is not sufficient to qualify as a significant approach. A significant approach requires at least a 20% reduction of the investable universe or an improvement in the ESG rating compared to the universe.
Greenwashing
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Greenwashing is defined as disproportionate environmental or sustainability communication relative to actual practices. The AMF seeks to prevent this practice by imposing strict rules on ESG communication.
Funds classified as Article 9 under SFDR must implement significantly engaging approaches within the meaning of the AMF doctrine.
Under the alignment with SFDR, funds classified as Article 9 must indeed implement significantly engaging approaches within the meaning of the AMF doctrine. This reflects their higher sustainability commitment compared to funds classified as Article 8.
Categorize items by dragging them to the appropriate zones
Items to categorize:
Essential criterion for a significant approach
Criterion not sufficient for a significant approach
A significantly engaging approach requires at least a 20% reduction of the investable universe, an improvement of the ESG rating compared to the universe after excluding the bottom 20%, and consideration of all three E, S, and G pillars. By contrast, the mere exclusion of controversial activities is not sufficient.