ESG strategy for Article 6, 8, 9 funds: A simple guide

In the world of sustainable investments and ESG (Environmental, Social and Governance) integration, the terms "Article 6", "Article 8" and "Article 9" are of crucial importance. These terms refer to provisions in the EU Action Plan for Sustainable Finance. In this article, we will explain to you what they mean and how they can influence the ESG strategy of funds.

What are Article 6, 8, and 9?

Articles 6, 8, and 9 relate to the EU Disclosure Regulation, which is part of the EU Action Plan for sustainable growth financing. This regulation requires financial market participants and financial advisers to disclose information about their strategies for integrating sustainability risks and considering negative impacts on sustainability factors.

• Article 6 Funds: These are conventional funds that include ESG factors in their risk process. They are not required to include sustainable investments in their strategy, but must explain how they consider ESG risks in their processes.

• Article 8 Funds: In addition to their usual investment strategy, these funds also promote ESG characteristics. These funds are required to disclose detailed information on how they promote these characteristics.

• Article 9 Funds: These funds have sustainable investment as their objective. They are required to demonstrate how their strategy contributes to achieving specific environmental or social goals.

The significance of the ESG strategy for Article 6, 8, 9 Funds

Implementing a solid ESG strategy is important for all types of funds, but it plays a central role for Article 8 and 9 funds.

1. ESG Risk Assessment: When implementing an ESG strategy, assessing and integrating ESG risks is a crucial first step. This involves identifying and analyzing potential ESG risks that can impact the investment portfolio.

2. ESG Integration: For Article 8 and 9 funds, it's not just about avoiding ESG risks, but also about making investments that promote positive ESG characteristics or achieve specific sustainable goals. This requires in-depth analysis and monitoring of the ESG performance of investments.

3. Transparency and Disclosure: A central aspect of the ESG strategy is disclosure and transparency to investors. Funds must provide detailed information on how they integrate ESG factors into their strategy and the impacts their investments have on ESG goals and risks.

Implementing a robust ESG strategy not only enables funds to meet regulatory requirements, but can also help in reducing risk and identifying potential investment opportunities. Therefore, it is an essential element for successful sustainable investments.