BNP Paribas Asset Management (BNPP AM) has followed BlackRock and Amundi in reclassifying its €15bn Article 9 ETF range to Article 8 as downgrades top €50bn worth of assets in November alone.
The French asset manager has reclassified 24 ETFs with the majority tracking Paris-Aligned Benchmark (PAB) and Climate Transition Benchmark (CTB) climate indices.
The move follows a similar approach taken by its rivals, with BlackRock downgrading over €20bn of Article 9 PAB and CTB ETFs while Amundi reclassified €19bn.
Without regulatory clarification, PAB and CTB strategies are unlikely to meet the 100% sustainable investment requirements outlined under ‘level 2’ of the Sustainable Finance Disclosure Regulation (SFDR) set to be implemented in January.
Currently, less than 5% of Article 9 funds target sustainable investment exposure between 90-100%, according to data from Morningstar.
Alongside its PAB and CTB ranges, the French asset manager has reclassified three thematic ETFs, the €672m BNP Paribas Easy ECPI Circular Economy Leaders UCITS ETF (REUSE), the €244.6m BNP Paribas Easy ECPI Global ESG Blue Economy UCITS ETF (BLUE) and the €61.8m BNP Paribas Easy ECPI Global ESG Hydrogen UCITS ETF (HYDRO).
A BNPP AM spokesperson said: “In line with the evolving SFDR regulation, 24 of BNP Paribas Asset Management’s index funds – with a combined AUM of €15bn – will be reclassified as Article 8.”
The downgrades come exactly a year after ETF Stream revealed BNPP AM had gone through a major overhaul of its ETF range, shifting €9bn of assets to ESG and PAB indices.
At the time, the French asset manager noted the regulatory challenges of adapting to ‘level 2’ of SFDR set to be implemented in January.
Asset managers have been quick to blame regulatory uncertainty for the downgrades with key questions, such as the definition of “sustainable investments” under Article 2 of SFDR, yet to be clarified by the European Securities and Markets Authority (ESMA).
As a result, asset managers have left the door open to future reclassifications back to Article 9 following a “clear statement from the regulator”.