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Under SFDR, Article 9 funds must follow a sustainable investment strategy, while Article 8 ESG funds are only required to promote sustainable outcomes © Bloomberg

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HSBC Asset Management has become the latest asset manager to downgrade the classifications of Paris-aligned exchange traded funds under the EU’s Sustainable Finance Disclosure Regulation.

The fund arm of London-based banking group HSBC has written to investors in seven Ucits ETFs, informing them that the vehicles’ SFDR categories will be changed from Article 9 to Article 8.

The changes, which take effect from December 1, apply to the HSBC MSCI Europe, Japan, USA, World, Asia Pacific ex-Japan and Emerging Markets Climate Paris-Aligned Ucits ETFs.

Under SFDR, Article 9 funds must follow a sustainable investment strategy, while Article 8 funds should consider environmental or social factors but do not need to target a sustainable outcome.

This article was previously published by Ignites Europe, a title owned by the FT Group.

According to recent guidance from the European markets watchdog, vehicles classified as Article 9 should exclusively be invested in sustainable assets.

HSBC AM said its move came “pending further regulatory clarification on the categorisation of funds that track benchmarks that qualify as EU Paris-aligned benchmarks”.

The company said its directors had “determined that it is in the best interests of investors to recategorise the funds as Article 8 funds under SFDR”.

“This is a recategorisation for SFDR purposes only. There is no change to the investment objective or investment policy of each fund or the way in which each fund is managed,” HSBC AM added.

BlackRock and Invesco made similar moves earlier this month, in a change that collectively affected more than 20 ETFs.

Morningstar analysis has indicated there has been an acceleration in fund firms downgrading products’ SFDR classifications as they prepare to implement new regulatory technical standards that will come into effect in January 2023.

*Ignites Europe is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at igniteseurope.com.

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