Amundi will reclassify the majority of its Article 9 funds as Article 8 by the end of this year, affecting approximately 100 products worth €45bn, half of which are open-ended funds.

The decision, first reported by Bloomberg, is part of a broader reclassification wave sweeping the European asset management industry ahead of the implementation of level 2 of the Sustainable Finance Disclosure Regulation (SFDR) on 1 January.

Amundi said its ‘deliberately cautious approach’ was aimed at protecting investors and distributors from a ‘significant risk of confusion in the allocation of savings’ resulting from the regulatory change.

‘While Amundi is pleased to see that regulations have come into force regarding the responsible investment market […] the current regulatory framework does not yet allow the financial industry to respond in a uniform manner as to what should be considered “sustainable” or not,’ the firm said.

Elodie Laugel, chief responsible investment officer at Amundi, told Citywire the funds will not change their investment processes as part of the reclassification, and Amundi’s ‘prudent stance’ is aimed at protecting end clients.

She also stressed that the regulatory framework had changed significantly from SFDR level 1 to SFDR level 2.

‘For example, all the ETF products that are tracking Paris-alignment were completely compatible with Article 9 in phase 1 of SFDR. In phase 2, very few ETFs answer the requirements of Article 9 because they are built with a transition approach.

‘A product with a net-zero objective cannot be classified as Article 9 either, because the companies are in a transition stage.’

Laugel said it was a matter of responsibility to not rush into adapting to the new classification of Article 9, while the regulatory definition of sustainable is not yet stabilised.

She added the discrepancies between different understandings of ‘sustainable activities’ are too large to make strategic decisions on behalf of end clients’ savings.

‘As of today, there’s a lot of uncertainty and discrepancy within the industry on what should be considered sustainable.

‘Therefore we are in a situation where each asset manager has created their own definition, and where the same index of listed companies in developed markets can be considered between 10% to 60% sustainable, depending on your methodology,’ said Laugel.

DWS, which recently reclassified five Article 9 funds to Article 8, told Citywire that limiting Article 9 funds’ investment universe to sustainable investments calculated on activity level could ‘significantly restrict the diversification of a portfolio’, and that this had influenced the firm’s decision to downgrade.

When asked if Amundi has similar concerns, Laugel said the firm’s decision was not related to diversification and rather the protection of end clients, but that questions regarding risk concentration could be raised.

‘About 5% of the listed companies in developed markets are aligned with the EU green taxonomy. That means that if you want to reach 100% of green-aligned activities in your portfolio, your investment universe shrinks by 95%.

‘Investors need to be aware of potential risk concentration issues. In the end, it’s about being transparent with end clients about both the sustainability features and the associated risk profile of Article 9 strategies under SFDR level 2.’

Laugel said the big question would be how to differentiate between the flurry of strategies now occupying the Article 8 bracket, as the swath of reclassifications means some funds have more stringent sustainability criteria than others.