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On this occasion, Sabrine Aouida, co-founder and Chief Impact Officer, spoke on the theme of ESG Investments: In the face of constant changes in ESG regulations, what strategies should be adopted to deploy investments in the environmental and social transition?
Here's what was said:
In 2023, we published our first sustainable finance barometer. On this occasion, we examined the level of ambition and transparency of ESG funds (i.e., funds classified as Article 8 and 9 under the SFDR) based on a representative panel of 50 European (but mainly French) asset management companies. Our analysis was based on an in-house developed grid covering the entire ESG operational chain.
The aim of this exercise, which we intend to carry out annually, is to address the risk of greenwashing faced by market players and to provide solutions at every level: from expertise (clarifying complex concepts and mitigating grey areas raised by regulatory uncertainties), to understanding strategic issues, operational processes, tools to be deployed, and data to be recovered, and so on.
The results of this analysis are in line with the findings of the AMF's SPOT checks, according to which none of the SGPs on the French regulator's panel fully complies with SFDR expectations, due to a lack of relevant available data and/or insufficient historical data.
According to our barometer, the majority of funds on the panel lacked transparency, particularly in their SFDR reporting and ambition. This can be explained by the complexity of these regulations, which has led players to focus their resources on complying with the regulator's expectations rather than developing more ambitious ESG strategies.
This barometer also highlights good practices, and through additional analyses we conducted to assess the progress of practices, we observed that in less than six months, certain portfolios have raised their ESG ambitions and applied more demanding processes.
For example, 10% of players have changed their coal exclusion policy by introducing stricter thresholds, reinforcing the coherence between their sustainability strategy and the ESG characteristics they promote.
The results are encouraging, since they demonstrate that improvements can be implemented quickly by the players involved!
The analysis carried out by WeeFin also demonstrated that the players correctly report on their controversy management and monitoring processes. Indeed, ⅔ of the funds analyzed have built a comprehensive and detailed controversy management and monitoring policy.
NGOs such as Reclaim Finance and Carbon Bombs are becoming increasingly vocal on climate and fossil fuel financing issues. They have drawn the attention of savers to the field of sustainable finance, and exposed market players to the risk of image and controversy.
It should also be emphasized that "name and shame" is not the only lever used by NGOs, which also offer support programs for financial players to raise awareness of best practices in ESG policies. Reclaim Finance is regularly received by financial institutions, and the results are conclusive: these exchanges have, for example, led a major French bank to improve its policy of calculating alignment with the objectives of the Paris Agreement or to an increase in the budget allocated to the ESG teams of a major French asset management company.
ESG is not just a stratum of the regulatory framework, but a real asset for clients who demand greater sustainability in the management of their money, as demonstrated by the surge in inflows to ESG funds in 2024. However, to make ESG a real differentiator, players need to carry out projects to structure the use of data and their ESG processes, thereby reducing associated costs.
What's more, regulations will continue to evolve, and no framework is yet permanent at this stage, as demonstrated by the forthcoming changes to SFDR and the SRI Label.
To meet the challenges of the future, stakeholders' practices must also evolve towards the use of data that is both more granular and easier to interpret. This is notably the case for the integration of biodiversity-related issues into investment processes, which were non-existent in management frameworks a few years ago but are now becoming central given the stakes involved.
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