The upheaval last year led investors and regulators alike to question the basic construction of the environmental, social and governance investing rulebook that Europe enforced more than two years ago. The Sustainable Finance Disclosure Regulation (SFDR), which EU officials had hoped would serve as a global standard, has undergone a series of updates since its enforcement to address a seemingly endless list of shortcomings.
A mass wave of downgrades that shocked investors as they watched Europe’s top ESG designation get stripped from almost US$200 billion ($266.29 billion) may now be reversed.
Many of the reclassifications, which saw a coveted ESG tag known as Article 9 get wiped off EUR175 billion ($255.78 billion) in funds in late 2022, appear to have been unnecessary in light of new guidance from the European Commission, according to Hortense Bioy, global director for sustainability research at Morningstar.
