The EU taxonomy aims to align market participants with definitions of sustainability, but investors need to dig deeper to find out how “green” a fund really is.
NEW YORK, March 21, 2022–(BUSINESS WIRE)–The EU taxonomy aims to align all market participants with sustainability criteria in the EU context, but investors need more transparency about how green the funds they offer really are. they buy. Clarity AI, the market-leading global technology platform for sustainability, shows in its analysis significant differences between the fund’s returns aligned with green objectives (and related to the EU taxonomy) of different types of sustainable investment products currently on the market.
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Only 7% of funds have more than 10% green income. (Photo: Clarity AI)
Under the Sustainable Finance Disclosure Regulation (SFDR), investors must provide the EU taxonomy along with the funds’ sustainability profile, which must fall into one of three categories:
Article 6: unsustainable funds
Article 8: Funds that promote sustainable characteristics, but not as a general objective
Article 9: Funds specifically created with sustainability goals in mind
In a white paper entitled “EU Taxonomy: Using technology to analyze the performance of ‘green’ funds”, Clarity AI analyzed an investment universe of 31,000 equity funds to determine how these products meet the new requirements. of the EU taxonomy and assessed the common characteristics of the funds. they are often referred to as “green” in some way. These are the results of the analysis:
Globally, 3.6% of crops can be described as green (“green crops”), meaning they help mitigate climate change.
Only 7% of the 31,000 equity funds analyzed have more than 10% green returns as defined by the EU taxonomy.1
With 15% of yields classified as green, Article 9 climate funds show four times greater alignment with the EU taxonomy than the average for the full sample. Article 8 funds, on the other hand, have a similar bias to the average 3.9% green return.
Funds focused on sectors that have a strong emphasis on the green transition, such as utilities, show greater alignment and bias with a 25% green return.
Thematic equity funds, such as alternative energy funds, are inherently more focused on the green economy, with up to 27% green returns.
Patricia Pina, director of research and product innovation at Clarity AI, said: “Given the different definitions and frameworks for sustainability around the world, we can see the EU taxonomy as a pioneer in establishing a common standard aimed at a large segment of global market participants. At Clarity AI, we believe that regulation must be underpinned by detailed, data-driven insights, and that transparency isn’t just a nice touch, it’s a must.
The EU recognizes that an important prerequisite for the further development of the sustainable investment market is “access to high-quality data related to sustainability”. two This quality data also means moving away from subjectivity and using an objective, fact-based definition of what should be considered ‘green’, ‘social’, ‘environmental’ etc. The EU taxonomy allows us to share a common language, which enables better decision-making and an accelerated transition to a more sustainable economy.
Trusted and transparent insights are at the core of sustainable, fact-based finance. They should become the norm in terms of making informed ‘green’ investment decisions.”
Notes for editors
About Clarity AI
Clarity AI is a technology platform for sustainability that uses machine learning and big data to deliver environmental and social information to investors and organizations. The Clarity AI platform analyzes (as of December 2021) more than 30,000 companies, 180,000 funds, 198 countries and 187 local governments and provides data and analysis for investment, research and company reports. Clarity AI has offices in the US, Europe, and the Middle East. Clarity AI’s client network manages trillions of dollars in assets. clarity.ai
Using its proprietary sustainability analytics technology platform, Clarity AI has developed a comprehensive assessment of how companies and funds align with the EU taxonomy’s sustainability ranking. Clarity AI draws on a wide range of available tools and data sources to increase the coverage, accuracy, and objectivity of sustainability analysis while remaining transparent. The method in this document is based on Clarity AI’s three steps of analysis with respect to the EU taxonomy and shows two key metrics that investors should report:
% of green defined income: defined by the income attributable to the activities described in the EU taxonomy
% Aligned with Green Performance – Based on defined activities and includes an assessment of technical selection criteria, DNSH and SS requirements
With its technology platform for sustainability, Clarity AI can assess over 180,000 funds and over 30,000 organizations at scale. For this report, Clarity AI took a closer look at the alignment of more than 31,000 funds worldwide with the EU taxonomy using a selected subset of their universe. When analyzing, Clarity AI focuses on parent funds (regardless of asset classes) of pure equity funds for which the company has sufficient information about the characteristics of the fund (such as assets under management, description, etc.). ). For comparison purposes, they cover a wide range of regions, sectors and strategies.
1 According to the EU taxonomy method for calculating alignment: using the weighted average of percentage green returns per company, based on weight within a portfolio
two According to a study by the European Commission published in June 2021
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