Helping investors navigate the ESG landscape
Classification systems group financial products based on shared sustainability characteristics. They provide structure and clarity in a rapidly evolving market.
Why it matters
- Investor clarity: Helps consumers and investors identify products that align with their values and sustainability goals.
- Market efficiency: Reduces confusion and enhances confidence in ESG-labelled products.
- Policy alignment: Supports regulatory efforts to direct capital toward sustainable activities.
Key features
Usually establish criteria for products to fall into each category. Sometimes classifications have corresponding insignia.
Example
Under the EU Sustainable Finance Disclosure Regulation (SFDR), funds are classified into categories (e.g., Article 6, 8, and 9) based on how they promote ESG characteristics or pursue sustainable investment objectives.
Note: the EU SFDR is the longest established sustainable finance regulatory framework, which was developed to be a disclosure regime. In the absence of an EU-wide labelling regime for sustainability labels, it has been used by industry as a proxy labelling and classification system.
RIAA Certification example
The RI Certification Standard is not itself a classification system, however, adherence to the RI Certification Standard is a pre-requisite for a RIAA Sustainability Classification. The RIAA Sustainability Classifications Initiative assigns three classifications:
- Responsible
- Sustainable
- Sustainable Plus
These classifications differentiate RIAA certified products based on their responsible investment approaches, claims, processes, stewardship programs and disclosures. They focus on the approach taken in considering ESG factors and the degree to which sustainability is addressed or targeted.
Examples of other frameworks
UK Sustainability Disclosure Requirements (SDR)
