The AMF Doctrine and SFDR: classification of funds and the compatibility of the EU and French rules

The French regulator, the Autorité des Marchés Financiers (AMF), has published guidance on the implementation of the EU's Sustainable Finance Disclosure Regulation (SFDR) and the compatibility of the SFDR with France's Position-Recommendation 2020-03 (the AMF doctrine).

Asset managers in scope of SFDR must comply with the majority of the SFDR's provisions by 10 March 2021. Asset managers marketing funds in France must also comply with the AMF Doctrine by 10 March 2021, one year after its publication.

Classification of funds under the SFDR

The SFDR requires asset managers to identify which of their funds meet the following criteria: Article 8, or so-called "light green" funds, promote environmental or social characteristics; and Article 9, or so-called "dark green" funds, that have sustainable investment as their objective. Article 8 and Article 9 funds demand different degrees of transparency.

On 7 January 2021, the European Supervisory Authorities wrote to the European Commission requesting clarification on several aspects of the SFDR, including the definitions of Article 8 and Article 9 funds. For instance, the letter questions whether a product that does not explicitly promote environmental or social characteristics, but which considers sustainability risks, would qualify as an Article 8 fund.

The AMF does not provide further clarity on the definitions of Article 8 or Article 9 funds, however it does emphasise the pressing need for clarifications ahead of the SFDR's effective date.

Compatibility of local rules and the SFDR

Some asset managers have also questioned the compatibility of the SFDR with the AMF Doctrine which applies to all funds that consider non-financial criteria and that are marketed to non-professional investors in France.

The AMF notes the complementary nature of the AMF Doctrine, which sets minimum requirements for marketing funds, and the SFDR's transparency objectives. Over time, the AMF will adapt France's national rules to converge with the EU's ESG standards, including the SFDR and changes to MiFID II, that will require financial advisers to take account of their clients' ESG preferences.

In the meantime, the AMF offers the following clarifications:

• the SFDR's pre-contractual and website disclosure requirements apply independently of the AMF Doctrine's requirements;
• funds that present non-financial characteristics as a key part of the product's name, the KIID or their marketing communication (even limited to a few sentences), and that conform with Article 8 and Article 9 of the SFDR must also comply with the AMF Doctrine's minimum standards; and
• Article 9 funds are expected to implement the requirements that apply to "significantly binding" approaches as defined in the AMF Doctrine.