29/10/2021

LGX fund window revamped to reflect SFDR 


As a response to the commonly known Sustainable Finance Disclosure Regulation (SFDR), the Luxembourg Stock Exchange (LuxSE) today announced the latest development of the Luxembourg Green Exchange (LGX), the award-winning platform for sustainable securities: a revamped fund window built on SFDR classification requirements.
“As a meeting place for issuers of sustainable finance products and impact-conscious investors, LGX promotes the sustainable finance agenda by fostering and supporting new market developments. As a frontrunner of innovation, we have adapted the fund section on LGX to reflect the new fund classification system brought by SFDR. With this revamped fund section, we provide information about funds that have been classified as sustainability-focused by their respective asset manager and bring more transparency to investors,” said Julie Becker, CEO of LuxSE. 
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Since LGX first increased its scope to include socially responsible investment funds in 2018, it has featured three different fund segments dedicated to green funds, social funds and ESG funds respectively. However, to reflect new market and regulatory developments, as well as to provide more transparency to investors, the LGX fund section has been revamped and now features two fund windows: one for ESG funds and one for impact funds.  

New regulatory classification system 

SFDR requires asset managers to classify investment products depending on the extent to which they take ESG factors into account in the fund’s investment strategy and objectives. Asset managers need to disclose the degree of sustainability focus established for each investment fund by classifying each fund under Article 6, Article 8 or Article 9 of SFDR. 

Article 6 covers funds which do not integrate any kind of sustainability into their investment process, while funds classified as Article 8 or Article 9 take sustainability concerns into account in the investment process, to different degrees.
 
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As defined in SFDR, Article 8 applies "where a financial product promotes, among other characteristics, environmental or social characteristics, or a combination of those characteristics, provided that the companies in which the investments are made follow good governance practices (...)”. Article 9 applies "where a financial product has sustainable investment as its objective (...)" or "where a financial product has a reduction in carbon emissions as its objective (...)".  

Funds that have been classified as Article 8 funds under SFDR by the asset manager are featured as ESG funds on LGX, while funds that have been classified as Article 9 funds under SFDR by the asset manager responsible for the fund, are featured as impact funds on LGX. 
 
Bringing clarity to investors

As a result of the new classification made by asset managers, 34% of all fund share classes listed on LuxSE are now classified under Article 8 or Article 9 of SFDR and are consequently featured on the revamped fund section of LGX. With this latest development, LuxSE provides further transparency to investors by centralising the classification of sustainability-focused investment funds listed on LuxSE. 
 
As of October 2021, more than 1,000 fund share classes are featured in the LGX fund window. ESG funds represent 82% of the funds displayed on LGX while impact funds make up 18% of funds on LGX. 
 
Explore the revamped LGX fund window