With the EU taxonomy and the Sustainable Finance Disclosure Regulation (SFDR) coming into effect from this year, Nawel Boukedroun is busy adapting to and implementing the new regulations in her analysis.
The SFDR seeks to provide greater transparency on the sustainability of financial products, increase the comparability of ESG information and minimise so-called "greenwashing", i.e. prevent false claims about the sustainability nature of an investment product.
In the new framework, funds are categorised into article 9 funds (dark green), article 8 funds (light green) and article 6 funds (all other funds).
Pareto ESG Global Corporate Bond – an article 9 fund
Funds promoted as ESG aligned are required to classify as being Article 8 or Article 9. Article 8 funds "promote environmental and social characteristics", while Article 9 funds "have sustainable investment as their objective". Pareto ESG Global Corporate Bond seeks to comply with the highest standards of sustainable investments and has been classified as an Article 9 ("dark green") fund.
- Title: ESG analyst
- Fund: Pareto ESG Global Corporate Bond
- Nordic Swan Ecolabelled and article 9 fund under the SFDR
- Office: Stockholm
Nawel Boukedroun is part of our fixed income team and works with ESG analysis for our Nordic Swan Ecolabelled fixed income fund. Boukedroun joined Pareto in 2020 from Swiss Life Asset Managers in Paris and holds a Master of Finance from Montpellier Business School, France.
Q: Why did the portfolio management team decide to classify the fund as article 9 fund?
– An important fact to mention first is that in addition to having a sustainable objective, article 9 funds must also include requirements of the article 8 scope. This means that environmental and social characteristics promoted must be binding, measurable and reportable, while holdings must meet the standard of "do no significant harm". These aspects have long been a vital part of our management process. Beyond that, Pareto ESG Global Corporate Bond has a sustainable objective along with the goal of producing positive financial returns. The fund is actively looking for viable companies with a bright and sustainable future. We are therefore convinced that the fund meets article 9 expectations.
Q: In what way, if any, has this classification changed or impacted the portfolio management in the fund?
– This classification has not impacted the portfolio management as it did not introduce a new investment strategy for the fund. We consider SFDR as a formalisation and a disclosure duty of pre-existing ESG practices applied by the management team.
Q: How has your job as an ESG analyst been affected by the new regulations?
– New regulations have a positive impact on my job, the way I see it. The EU taxonomy aims to uniform criteria to identify if economic activities may be considered "environmentally sustainable". This will enable us to further limit the ESG risk related to "greenwashing" and overstatements.
The framework under the EU taxonomy will also urge companies to identify potential risk and measure exposure. This will help to enhance companies' knowledge on sustainability issues and thus simplify our engagement role.
Our objective with SFDR consists of bringing to clients a total transparency on our commitment to allocate assets sustainably. This requires maintaining a great deal of work but at the same time allows interesting discussion and collaboration with other experts in the field. A great way to constantly keep learning in order to respond to this fast-changing environment.
Q: What are the main ESG challenges under SFDR, as you see it?
– The lack of available and reliable data at the company level is the main challenge for the time being. The European Commission adopted its final rules through the EU taxonomy on April 21. This is a key step in driving forward transparency for companies and a way for us to collect more reliable input for our analysis. Although we believe that the new European regulations will have a positive influence on the global market, our role is to ensure that all our holdings will match new expectations. This must be done in a short lapse of time to meet the January 2022 SFDR reporting deadline.
I am ready to take on the challenge!