Benchmark prior transactions, bonds, loans or company profiles using over 300 credit metrics.

Comparables

AI transcripts & instant analysis, making earnings season easier than ever.

Earnings

A full suite of ESG data and analysis. Built for your workflow

Spot undervalued credits and potential future restructurings with our purpose-built tools.

Distressed and Restructuring

Full Financial profiles with 3 statements, KPIs, segment splits & credit metrics. All traced to source documents.

Financials

New deal analysis and covenant comparison tools, understand key risks in seconds not days.

Covenants

Say goodbye to CTRL + F with our powerful search. Thousands of documents text searchable for any keyword or phrase.

Search

We've successfully predicted more than 65 price sensitive events - before they happened.

Deal predictions

We use AI to aggregate newsflow from 2,000 sources, and deliver it to your inbox quicker than anyone else.

News

Track high yield deals from issuance through to maturity, with integrated legal, credit and ESG analysis.

High Yield Bonds

Shine a light on private markets with 9fin's news and legal analysis of syndicated loans

Leveraged Loans

21st century tech and expert analysis to help CLO teams make informed decisions faster.

Structured Credit 

Find information others can't see in one of the fastest growing corners of finance

Private Credit 

Sammy Cole

Welcome back to The Olive Tranche. In this 9fin feature we attempt to steer a course through the choppy waters of ESG as it relates to LevFin. The intention is to encourage open discussion on some of the stickier topics. Don’t hesitate to get in touch with your thoughts.

The wide-ranging consultation on the EU’s Sustainable Finance Disclosure Regulation (SFDR) is well underway. But, as of yet, there has been “no clear preference” on the way forward, according to the European Commission.

The consultation was called back in September 2023, after concerns that the regulation was not fit for purpose.

Yes, there are kinks to the regulation that need to be ironed out — such as clearly defining what ‘sustainable investment’ actually means! And while we’re at it, this definition needs to allow scope for transitioning companies to be eligible (how else do we encourage change?).

But, that said, let’s not forget the successes of the SFDR. It has pushed sustainable finance into the spotlight and provided insight into investor demand to deploy capital towards this space.

Let’s first address the criticism. In 2022 we witnessed the great reclassification, when more than 350 funds reclassified from Article 9 to 8 due to confusion over the definition of sustainable investment. The SFDR has also drawn scorn with investment managers accused of advertising their products as sustainable, while their portfolios include carbon-intensive businesses that are not aligned with the Paris Agreement.

Some have called for the removal of Article 8 and 9 altogether. The Institute for Energy Economics and Financial Analysis (IEEFA) has taken this stance and said that cracks in the current system have become “increasingly obvious”.

Others have called for the SFDR to be scrapped entirely. Ex-DWS sustainability head Desiree Fixler has described it as “a waste of taxpayer money”. Fixler famously called out her former employer for greenwashing back in 2021.

The European Commission has not been particularly clear whether transitioning companies can be considered as sustainable investments under the SFDR.

As a result, ‘sustainable’ Article 9 funds have generally been focused on companies with a low carbon footprint, rather than companies that are actually transitioning their business models to be in line with a 1.5°C world.

Ashurst partner Lorraine Johnston told Sustainable Views that transition activities are an important means towards achieving a net zero carbon economy, but that Article 9 does not permit this.

In contrast, the UK’s fund labelling regime, the Sustainable Disclosure Regulation (SDR), puts a much greater emphasis on transition. One of the potential fund labels is “Sustainability Improvers”, which is a fund investing mainly in assets that may not be sustainable now, but have the intention of improving sustainability for people, or the planet, over time.

Despite the lack of focus on the transition in the SFDR, it has spurred on conversations surrounding the transition. Some managers, for example abrdn, offer funds that include companies in heavy industries that are transitioning, while at the same time carrying the Article 9 status.

The European Commission has also expressed a desire to support transition finance and 80% of the respondents to the SFDR consultation said a category for transition-focused products would be “useful to a large or very large extent”.

Let’s be clear, there is still confusion around whether a sustainable investment can encompass transitioning companies, but the discourse is growing and regulatory authorities are learning.

Since the SFDR entered into force, there has been a huge discrepancy in the approaches taken to structuring Article 8 and 9 funds.

When analysing an array of funds for 9fin’s webinar on the SFDR back in November 2022, we found that a number of Article 8 funds had simply formalised ESG exclusions in response to the SFDR, without actually changing a single characteristic of their investment strategy.

However, through introducing mandatory disclosure, the SFDR has helped shine a light on these issues and encouraged conversations about what best practice looks like.

There is a plethora of resources and webinars on Article 8 and 9 best practice and the European Securities and Markets Authority’s (ESMA) SFDR consultation in April 2023 led to extensive feedback from stakeholders.

Hugh Wheelan, co-founder of Responsible Investor, argues the disclosure-based regulation has become a “huge, costly administrative burden for compliance, legal and reporting teams”, but these “onerous” reporting requirements have given us valuable insights.

For example, scope 1 emissions from companies held in Article 8 and 9 funds have fallen 13.7% more than other fund types following the introduction of the SFDR, according to the European Corporate Governance Institute.

“Overall, our results support the notion that mandatory disclosure can incentivise decarbonisation by asset managers,” the group said.

Now, back to the definition problem. The SFDR’s definition of a sustainable investment is far from perfect. In fact, the SFDR doesn’t actually provide a workable standardised definition of a sustainable investment at all.

According to the European Commission, “Financial market participants must carry out their own assessment… and disclose their underlying assumptions.”

So, basically, sustainable investment is whatever a fund manager says it is. This has led to fund managers labelling investments as “sustainable” even if they do not meet ESG criteria.

But regulation is about trial and error. And enforcing the SFDR has revealed the market needs more clarity on what equates to a sustainable investment. The current consultation could lead to the European Commission scrapping the Article distinction and designating descriptive categories with 70% thresholds for sustainable investments. Or the commission could decide to keep the Articles as they are.

Whatever happens, it is vital that investors are absolutely clear on what constitutes a sustainable investment and what doesn’t. It is also important that this definition allows scope for transitioning companies to be considered sustainable.

Even if the European Commission does change course and introduce fund labels akin to those of the SDR, this doesn’t mean starting from scratch. It just means that there will need to be discussions surrounding how best to use this data to generate real world impact.

The Olive Tranche — In defence of the SFDR

Owen Sanderson

Excess Spread — Sweet release, baked Danish

9fin team

Webinar Replay — Free fallin': Chapter 11 trends that defined 2025 and what's next

Sasha Padbidri

Luke Viner

The Singapore cross-class cramdown provision’s future is now

Webinar Replay — The art of the LME: defining trends in 2025, and looking ahead to what’s next

Save time, react faster to news, outperform your peers.

Asset Managers & Hedge funds

Save time, pitch more efficiently, and win business.

Investment Banks

Turbocharge your trading desk P&L, with the market's fastest news alerts.

Sales & Trading

Spot novel covenants, save time drafting and win business.

🍪 Our Cookies

The Olive Tranche — In defence of the SFDR

Read all our public content for free

Recently Published

Excess Spread — Sweet release, baked Danish

Webinar Replay — Free fallin': Chapter 11 trends that defined 2025 and what's next

The Singapore cross-class cramdown provision’s future is now

Webinar Replay — The art of the LME: defining trends in 2025, and looking ahead to what’s next

What are you waiting for?