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The impact of Article 9 funds: driving sustainable investment in the EU
- The Sustainable Financial Disclosure Regulation (SFDR) in the EU has introduced three categories for funds to classify themselves based on their environmental and social impact, with Article 9 being the most rigorous of the three.
- Nearly 1,000 Article 9 funds exist across various asset classes, managing over €300 billion, playing a crucial role that guides investments towards achieving net-zero greenhouse gas emissions.
- The SFDR framework requires funds to disclose how they pursue impact targets through investments, leading to institutional investors setting goals for how much of their portfolios should be allocated to these funds.
- Despite higher costs and resource consumption required for Article 9 funds, investors are increasingly investing in companies that offer true solutions to sustainability challenges, expecting those companies to outperform in the long run.
- Founders of climate tech companies that meet Article 9 criteria have access to non-dilutive funding, as well as the potential for corporate acquirers and investors to offer a premium for validated sustainability efforts.
- The SFDR is a key pillar supporting the successful implementation of the European Green Deal, aimed at reducing net greenhouse gas emissions by at least 55% by 2030 and transforming the EU into a modern, resource-efficient and competitive economy.
- The SFDR is a powerful tool against greenwashing in the EU, and is expected to have a lasting influence on investors, companies and society as a whole, driving a financial shift towards truly impactful investments.
- As transparency improves and impact becomes a priority, Article 9 funds are set to play an increasingly pivotal role in the EU's efforts to create a sustainable, climate-neutral economy, benefiting investors, companies and society in the long term.
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