The aim of the SFDR is to give investors more insight into how managers of portfolios and investment funds deal with sustainability. This transparency should help investors get a better understanding of the sustainability of financial products and compare them more easily. The SFDR text includes articles 6, 8 and 9, which have become important in this transparency.
These articles set the conditions that certain sustainable investment products must meet. However, the SFDR is not a classification system. It does not determine whether a product is sustainable or not. It only provides a number of conditions for communication about sustainability. In this text, we use the term ‘funds’, but the SFDR also applies to individually managed portfolios and some other investment products. Below we explain the most important articles.
"}},{"componentType":"sectionTitle","title":"The SFDR distinguishes between three types of funds"},{"componentType":"paragraph","richBody":{"value":"For most investment funds in the market, sustainability is not an important part of the investment process. These funds are also called article 6 funds. You can think of index funds. These funds follow a certain index, such as the AEX index, and do not deviate from it. There are active investment funds that do include sustainability in their investment process, but only to improve the risk profile of the fund. A manager must always indicate whether or not they take sustainability risks into account in their considerations.
"}},{"componentType":"sectionTitle","title":"Article 8: funds with sustainability features"},{"componentType":"paragraph","richBody":{"value":"When a fund states that it consciously includes sustainability in the investment process, this means it promotes sustainability. The fund must then explain clearly to its investors what these ‘sustainability features’ are and whether they relate to social aspects or environmental aspects. Such a product is also called ‘light green’ in the market. Light green is not a very good name, because this article includes funds with one or a few exclusions (for example controversial weapons or tobacco) as well as funds with many exclusions, a best‑in‑class approach and a strong voting and engagement policy. A condition for the investments in the fund is that all companies in the fund are well governed.
"}},{"componentType":"sectionTitle","title":"Article 9: funds with specific sustainability features"},{"componentType":"paragraph","richBody":{"value":"Funds with a sustainability goal are also called article 9 funds or dark green funds. These funds do not have to be greener than a so‑called article 8 fund, but they are defined by the fact that all investment instruments in the fund must contribute to one or more goals in the area of sustainability (cash or derivatives may be excluded). The goal can vary from investing in companies that help reduce poverty to reducing CO₂ emissions.
Article 2.17 Sustainable investment
A special article in the SFDR is article 2.17. This article gives a definition of a ‘sustainable investment’. Until now, fund managers decided for themselves when something is sustainable or not, but the law now provides more direction. A sustainable investment must meet three conditions: the investment must contribute to achieving a social and/or environmental objective, it must not cause significant harm to the environment, people or society, and the company must apply good governance practices. Fund managers may choose how they apply these three elements. In practice, we see large differences in how the definition is interpreted. We also see that investments in a sustainable fund are almost never only ‘sustainable investments’. The definition does not fit well with the investment process of a fund manager. Usually, this percentage is between 0% and 40% for funds under article 8. For funds with a sustainability goal (article 9), this percentage is between 75% and 100%.
ING integrates sustainability in different ways.
The Portfolio Management strategies Index and Sustainable also fall under article 8. They apply more exclusions, including companies active in weapons, oil, non‑conventional gas, alcohol, gambling, pornography and fur. They also exclude companies with controversial behaviour and use a best‑in‑class approach (the best 70%). These strategies invest at least 20% in ‘sustainable investments’.
The profile funds of Easy Invest fall under article 8 as well. These funds are characterised by a minimum percentage of sustainable investments (20%).
You can read more about our policy in the Responsible Investing Guidelines on ing.nl/esg.
"}},{"componentType":"sectionTitle","title":"See also"},{"componentType":"paragraph","richBody":{"value":"> What is sustainable investing?
> Start with sustainable investing
> Duurzaam beleggen: wat levert het op?
Investing involves risks and costs. You may (partially) lose your investment amount. Read more about the risks of investing and how to limit them.
Visit ing.nl/ESG to see exactly how ING includes sustainability.
*This translation is intended for the customer’s convenience only. In the event of any inconsistency between the English translation and the original Dutch version, the original Dutch version shall prevail.