Amundi Downgrades ESG Funds as Sector Faces $85 Billion Hit

Amundi SA is removing the European Union’s highest ESG designation from virtually all funds that once carried it, as it joins a growing list of investment firms that have been wrong-footed by a change in regulatory guidelines in the bloc.

Europe’s largest asset manager is reclassifying almost all of its range of funds listed under the EU’s top ESG category, known as Article 9, a spokesperson for the asset manager told Bloomberg. Instead, the funds will be classified as Article 8, the spokesperson said, referring to the EU’s less stringent environmental, social and governance fund class. The decision reflects “a conservative approach” as Amundi tries to adapt to the EU’s evolving regulatory environment, the person said.

Amundi had almost €38 billion euros ($39 billion) in Article 9 products at the end of October, according to data compiled by Morningstar Direct and confirmed by Amundi. Morningstar expects that at least $85 billion in industry-wide Article 9 funds will be downgraded within the coming weeks and months, with roughly $70 billion of that likely to be in passive strategies.

“We expect many, if not all, of what we call ‘climate conscious’ and ‘low carbon’ funds to shift from Article 9 to Article 8,” Hortense Bioy, Morningstar’s global director of sustainability research, told Bloomberg.