Stockholm (NordSIP) – As the new naming guidelines from the European Securities and Markets Authority (ESMA) for ESG or sustainability-related funds enters into force, the timing couldn’t be better for a quick check up on your sustainable investments’ selection process.
For this purpose, it may be useful to have a look at a short but handy guide published by ETF boutique ARK Invest Europe this week titled “How to Navigate Sustainable Investing in 2025: Useful Tips for Fund Selectors.”
The guide includes tips to detect inconsistencies, or one could say, greenwashing attempts by asset managers. Even seasoned sustainable fund selectors might find some useful insights about the verification of sustainable investment proportion measurements, for example. Indeed, the guide highlights how many fund issuers calculate the proportion of sustainable investments of their funds considering “100% of an investment in a company to be considered a “sustainable investment” so long as that company derives some (i.e., more than zero) of its revenues, CapEx or OpEx from sustainable economic activities without supplementing that with more relevant methodologies such as Sustainable Thematic Revenue Alignment or EU Taxonomy Alignment.”
The guide also provides some tips on how to ensure that the methodologies are followed or applied in practice, which includes spot checking holdings and asking for one-pagers that explain the rationale behind the stock-picking from a sustainability angle. Advice for the assessment of sustainable investing expertise and regulatory planning is also outlined. For example, the guide states: “A historical pattern of downgrades [from article 9 to article 8] represents a significant red flag, indicating potentially serious weaknesses in strategic planning, regulatory compliance, and operational risk management, raising concerns about future adherence to regulations and credibility in sustainable investment commitments.”
ESG Governance analysis as well as extra scrutiny for Impact funds are also recommended. Of course, ARK Invest Europe also offers services that can help in the process. Previously called Rize ETF, the firm proposes an investment suite of thematic solutions in the form of ETFs and was acquired in September 2023 by North American investment advisor ARK Invest.
— This article was modified to take into account a correction by ARK Invest. The original version of the guide referenced EFAMA and “the EFAMA method”. The guide has since been corrected, as EFAMA does not propose a method.
Image courtesy of NordSIP - This image was generated using AI for illustrative purposes
Stockholm (NordSIP) – As the new naming guidelines from the European Securities and Markets Authority (ESMA) for ESG or sustainability-related funds enters into force, the timing couldn’t be better for a quick check up on your sustainable investments’ selection process.
For this purpose, it may be useful to have a look at a short but handy guide published by ETF boutique ARK Invest Europe this week titled “How to Navigate Sustainable Investing in 2025: Useful Tips for Fund Selectors.”
The guide includes tips to detect inconsistencies, or one could say, greenwashing attempts by asset managers. Even seasoned sustainable fund selectors might find some useful insights about the verification of sustainable investment proportion measurements, for example. Indeed, the guide highlights how many fund issuers calculate the proportion of sustainable investments of their funds considering “100% of an investment in a company to be considered a “sustainable investment” so long as that company derives some (i.e., more than zero) of its revenues, CapEx or OpEx from sustainable economic activities without supplementing that with more relevant methodologies such as Sustainable Thematic Revenue Alignment or EU Taxonomy Alignment.”
The guide also provides some tips on how to ensure that the methodologies are followed or applied in practice, which includes spot checking holdings and asking for one-pagers that explain the rationale behind the stock-picking from a sustainability angle. Advice for the assessment of sustainable investing expertise and regulatory planning is also outlined. For example, the guide states: “A historical pattern of downgrades [from article 9 to article 8] represents a significant red flag, indicating potentially serious weaknesses in strategic planning, regulatory compliance, and operational risk management, raising concerns about future adherence to regulations and credibility in sustainable investment commitments.”
ESG Governance analysis as well as extra scrutiny for Impact funds are also recommended. Of course, ARK Invest Europe also offers services that can help in the process. Previously called Rize ETF, the firm proposes an investment suite of thematic solutions in the form of ETFs and was acquired in September 2023 by North American investment advisor ARK Invest.
— This article was modified to take into account a correction by ARK Invest. The original version of the guide referenced EFAMA and “the EFAMA method”. The guide has since been corrected, as EFAMA does not propose a method.
Image courtesy of NordSIP - This image was generated using AI for illustrative purposes
