Knowledge Base
Explain and analyze specific sustainable finance concepts as defined by the AMF certification program
Which indicators are mandatory under the SFDR regulation for Principal Adverse Impacts?
The SFDR delegated regulation lists mandatory indicators for Principal Adverse Impacts, including environmental indicators such as greenhouse gas emissions and social indicators such as the gender pay gap.
What is the minimum investment universe reduction threshold for an approach to be considered significantly engaging according to the AMF?
According to AMF position-recommendation DOC-2020-03, an approach is considered significantly engaging if it reduces the investment universe by at least 20% by eliminating the lowest-rated ESG issuers. This threshold was initially aligned with the ISR label before the label raised it to 30% in 2024.
What is the minimum ESG coverage threshold required by the AMF for funds with a central sustainability claim investing in large-cap developed market equities?
The AMF requires an ESG coverage rate above 90% for funds with a central sustainability claim investing in large-cap developed market equities. This threshold is justified by the availability of ESG ratings for these asset classes.
What are the two possible approaches for applying the concept of selectivity?
Selectivity can be applied on a sector basis (best-in-class) by comparing companies within their industry, or on an absolute basis (best-in-universe) by eliminating the lowest-rated issuers from the overall universe. Both approaches are defined in the AMF doctrine.
The ESG coverage rate required by the AMF is the same for all asset classes.
The AMF requires an ESG coverage rate above 90% for large-cap developed market equities, but this threshold drops to 75% for emerging market equities, SMEs, and high-yield bonds. This shows that the AMF acknowledges the limitations of rating agency coverage for certain asset classes.
"Rating improvement" according to the AMF
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Rating improvement refers to the objective of achieving an average portfolio ESG score that exceeds that of the reference investment universe. This improvement must be calculated after eliminating the bottom 20% of lowest-rated companies to prevent windfall effects.
Norm-based exclusions alone are sufficient to qualify an approach as significantly engaging according to the AMF.
The AMF specifies that exclusions based solely on normative criteria or the mere exclusion of controversial activities are not sufficient to qualify an approach as significantly engaging. Such exclusions fall more within reputational risk management than a proactive ESG strategy.
Categorize items by dragging them to the appropriate zones
Items to categorize:
SFDR Regulation
AMF Doctrine
The SFDR regulation imposes a classification of financial products based on their integration of sustainability criteria (Articles 6, 8, 9). The AMF doctrine adds minimum standards for marketing in France, such as selectivity and ESG coverage thresholds.