A framework for classifying organisations, funds and indices as sustainable investments – by Laura Miller
Clarity AI has launched a sustainable investment index and ETF methodology, which aligns with the Sustainable Finance Disclosure Regulation (SFDR).
According to the sustainability technology platform, the methodology will help index and ETF providers build, define and market products falling within the European Union’s definition of sustainable investment, outlined in Article 2(17) of the SFDR.
Clarity AI’s methodology is being used in indices that target companies at the forefront of key innovative industries – such as electric vehicles and sustainable infrastructure – and ETFs based on those indices.
It can also be applied to broader market indices and funds where investors want to integrate sustainable objectives.
The methodology is a framework for classifying organisations, funds and indices as sustainable investments.
Clarity AI’s aim is for this to ensure greater confidence for investors who seek to align their portfolios with sustainable principles.
For financial market participants seeking to determine what is considered a sustainable investment, Clarity AI’s methodology is also customisable, and can be used to determine how companies pass the sustainable investment assessment.
This includes setting thresholds on UN Sustainable Development Goals (SDGs) and EU Taxonomy contribution, and SFDR Principle Adverse Impact indicators (PAIs), among other criteria, all within the ranges of what is accepted by the regulation.
Ani Widham, senior product manager at Clarity AI said the implementation of the methodology into indices and ETFs “sets a precedent for sustainable investing that can shape the future of the financial markets”.
She added: “We know that investors seek clarity and transparency when evaluating their portfolios. Providing them with this efficient methodology, aligned with the SFDR regulation, will enable them to make better sustainable investment decisions to benefit their companies and the wider sustainable investment industry.”