BETTER FINANCE position on the classification of investment funds regarding sustainability

EU Law rightly requires information provided to individual investors to be clear, i.e., “presented in a way that is likely to be understood by, the average member of the group to whom it is directed, or by whom it is likely to be received”, and as such, retail investors expect definitions and classifications of funds to be understandable.

While BETTER FINANCE recognises that definitions are evolving, in view of ongoing calls for evidence on greenwashing and public consultations related to guidelines on funds’ names using ESG or sustainability-related terms, expected changes to the regulatory requirements have been confusing for non-professional retail investors.

BETTER FINANCE would like to point out that there is an urgent need for:

• further clarity on definitions to enhance retail investor understanding and differentiation of requirements and content related to Article 8 & 9;
• guidance and sufficient explanations regarding the outcome of re-classifications to better inform non-professional retail investors;
• and a need to focus Article 9 on impact and engagement instead of exclusion in order to strengthen the green classification and avoid greenwashing

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