To help firms manage the greenwashing risk, fund service providers will play a more important role in validating ESG funds.

At the recent Funds Europe Luxembourg panel, Cuan Coulter and other industry experts discussed the “watchdog” role of fund service providers. The panel featured industry experts, such as Frederic Van Ingelgom, continental Europe head of Business Development and Client Management Luxembourg, Asset Owners and Managers at HSBC Securities Services, Silke Bernard, global head of Investment Funds Practice at Linklaters Luxembourg, and Chrystelle Veeckmans, head of Asset Management EMA, partner at KPMG in Luxembourg.

During the panel, experts discussed how regulations around sustainable investing are becoming clearer and can lead to an increase in the number of “Article 9” funds – investment funds with the strongest ESG credentials. According to Morningstar, 307 Article 9 funds were downgraded to Article 8 in the fourth quarter of 2022, with combined assets under management of €170 billion. The trend continued into 2023, with €99 billion of ESG funds downgraded to Article 8 in the first month of the year. Though the EU has issued FAQs and guidance statements that have helped clarify regulatory rules, there is still a long way ahead for the industry due to the different interpretations of rules around sustainable investment funds.

This article was originally published in Funds Europe in September 2023.