Analysts from Barclays (LON:BARC) Plc and Goldman Sachs Group Inc (NYSE:GS). have projected significant disruption for asset managers in the European Union due to potential alterations in Environmental, Social, and Governance (ESG) investing rules. The EU Commission is planning a review of the Sustainable Finance Disclosure Regulation (SFDR), which currently requires asset managers to categorize funds into three specific ESG categories: Article 6, Article 8 with nearly $6 trillion registered funds, and Article 9.
The introduction of an ESG fund labeling framework could considerably alter this structure, impacting sectors that are controversial or high-emitting. Mairead McGuinness, the EU’s commissioner for financial markets and services, has expressed her intention to evaluate if SFDR is "fit for purpose." Studies conducted by Goldman Sachs highlight the influence of SFDR categories on client flows.
The EU has initiated a comprehensive consultation process with a deadline set for December 15, 2023. This process aims to address investor concerns about greenwashing, the need for reclassifications, and potential misuse of SFDR as a labeling system.
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