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ICE Sustainable Finance Monthly
January 2023

ICE Sustainable Finance Monthly

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Elizabeth King
Elizabeth King
President, Sustainable Finance & Chief Regulatory Officer, ICE

Does it do what it says on the tin?

Financial product classification and labelling is currently under the spotlight, with sustainability labelling a particularly hot topic in the wake of the implementation of the European Commission’s regulatory technical standards (Level 2) of the Sustainable Finance Disclosure Regulation (SFDR) at the beginning of this year.

As a result, sustainable fund classifications are facing closer scrutiny. High profile fund reclassifications (from Article 9 to Article 8) have been grabbing the headlines and sparking a debate as to the reasons for these changes.

Were these funds reclassifying themselves because they were unable to meet the standards that Article 9 classification brings, arguably a key transparency objective of SFDR? Or are the fund managers just looking to avoid the scrutiny and burden of increased disclosure that is applied to Article 9 funds, especially given the focus on greenwashing by regulators and the media?

Our analysis of ICE data on fund classification points towards an overlooked trend when it comes to the sustainability ambitions of funds. While there has been a decline in the total number of funds with an Article 9 classification (products targeting sustainable investments) over the past year, with that decline accelerating in the last quarter of 2022, the overall growth of sustainability focused funds remains positive.

The reclassifications by funds from Article 9 to Article 8 (environmental and socially promoting investments) have been offset by reclassifications from other Articles, especially with an increase in Article 8 funds. The bulk of this increase of Article 8 funds is the result of funds moving from an Article 6 (do not integrate any kind of sustainability) to an Article 8 classification, rather than reclassifications from Article 9.

Overall, there appears to remain a trend in funds integrating sustainability factors, at least in part, into their investment purposes, even if Article 9 may be inapt or unattractive to some funds. We continue to monitor this data closely for evidence as to whether the fourth quarter Article 9 reclassifications were a one-off adjustment to the SFDR, and not a broader change in sustainable investing ambition.

This month's hot topics

The Link Between Access to U.S. Municipal Debt and Socioeconomic Outcomes

The more money you have, the cheaper borrowing tends to be. But for poorer school districts seeking to finance infrastructure, maybe that shouldn’t be the case. A study by ICE data scientists analyzed over 12,600 school districts across the US, alongside academic literature, to inform municipal bond market participants and stakeholders about how capital allocation and policy choices may impact students, school districts, and communities.

Learn more

2022 Impact Bond Report

Our annual global impact bond report points to robust appetite for sustainable investments: while overall bond issuance fell 61% last year, impact bond issuance was only 13% lower by comparison.

Read now

Scope 3 Materiality: The Full Picture

Just because a company has published some level of Scope 3 emissions does not necessarily mean that investors have the full and complete picture. In our latest article, we discuss the importance of understanding the details of the disclosure across the different categories and reveal why materiality really does matter.

Read now

Alveo Integrates ICE’s ESG Data into its Prime Data Management

Alveo, a leading Financial Data Management SaaS provider, recently announced the integration of ICE ESG Company data and analytics into its Prime data management solution. The integrated ESG content includes the different Principal Adverse Indicators (PAIs) of the EU’s Sustainable Finance Disclosure Regulation (SFDR), EU Taxonomy data, as well as hundreds of additional data points on the ESG profile of companies.

Learn more about ICE ESG Data

Solution spotlight

Mortgage-Backed Securities gain ESG data coverage

We recently launched ESG data coverage on over 1.5M mortgage-backed securities (MBS) boosting our total fixed income coverage to over 3M instruments. ICE’s MBS data set accounts for ~95% of all outstanding securitized real estate loan volume in the U.S. and provides CUSIP-linked climate and socioeconomic data for single-family, multi-family and commercial mortgage-related securities

Helping meet SFDR requirements

The European Union’s Sustainable Finance Disclosure Regulation (EU SFDR) requires financial market participants to identify and disclose certain sustainable impacts. To help clients meet their obligations, our data solution offers event-triggered updates for all mandatory adverse sustainability indicators applicable to investments in companies, sovereigns and supranationals.

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