Analysis reveals majority of sustainable funds fall short of EU, US and UK regulations

Companies face the risk of not complying with future regulations and guidelines in the area of governance and sustainability. Pensions & Investments took a closer look at the significant changes and found, that many sustainable funds could not meet EU, US and UK rules-analysis.

Many funds labelled as sustainable may need significant changes to meet regulatory requirements in the US, UK, and EU, according to Clarity AI’s analysis, a sustainability technology platform. Only 4 % of such funds can comply with all three sets of regulations, highlighting differing interpretations of ESG and sustainability. The European Securities and Markets Authoritie’s (ESMA’s) proposed rules for “light green” funds require specific asset allocations and alignment with SFDR and Paris agreement criteria. Clarity AI found that most current “light green” funds don’t meet these thresholds. Furthermore, ESMA’s proposal differs notably from those in the UK and the US.