Sustainability tech leader Clarity AI has introduced a cutting-edge solution designed to help fund managers align with evolving sustainable investment naming regulations across Europe. This new tool addresses the rising complexity of ESG-related fund standards, mitigating greenwashing risks while ensuring compliance.

As European regulators launch initiatives like the UK FCA’s Sustainability Disclosure Requirements (SDR), France’s SRI label, and Germany’s FNG, clear criteria for sustainability-focused funds are becoming critical. Recent guidelines by the European Securities and Markets Authority (ESMA) require funds using terms like "sustainability" or "green" to meet strict thresholds—at least 80% of assets must adhere to sustainability characteristics, alongside exclusion criteria under the Paris Aligned Benchmarks (PABs). Clarity AI's analysis shows that over 40% of ESG-labelled funds may need renaming to comply with these standards.

“Sustainability regulations and labels are proliferating, making it increasingly challenging for fund managers to keep up,” said Tom Willman, Regulatory Lead at Clarity AI. “A significant amount of resources is tied up in regulatory obligations. These could be better used to develop sustainable solutions that support end-investors’ sustainability goals, and technology is key to making this process more efficient.”

The solution offers fund managers, portfolio managers, and ESG analysts an intuitive platform to monitor complex regulations. It consolidates compliance metrics into one interface, currently supporting German FNG, UK SDR Labels, and Paris-Aligned Benchmarks. Additional standards, including France’s SRI label and Belgium’s Towards Sustainability label, will follow soon.

According to Henry Waind, Product Lead at Clarity AI, the tool streamlines processes, helping fund managers identify non-compliant investments and address gaps efficiently. "The goal is to reduce the amount of time fund managers spend on identifying potential investments that fall short of the standards and understanding the cause for non-compliance, in order to decide on the best course of action,” he said.

With this innovative launch, Clarity AI positions itself as a key enabler of compliance and transparency in the sustainable investment space.