A few days ago, I was asked if the Sustainable Finance Disclosure Regulation (SFDR) and the respective definitions and classifications within the EU Taxonomy are the gold standard for sustainable investing which should be used as a blue print for global regulations. My answer to this question was no. Despite the fact that I think that SFDR and the respective reporting duties under the Markets in Financial Instruments Directive II (MiFID 2) are a good starting point, I think there are still too many blind spots within the regulations which leave too much room for interpretation and may therefore lead

On April 6, 2022, the European Commission adopted the disclosure rules on sustainable investments. These technical standards were long awaited by industry participants as they specify the exact content, methodology, and presentation for disclosing sustainability-related information to comply with the Sustainable Finance Disclosure Regulation (SFDR) (Regulation (EU) 2019/2088), which came in force on March 10, 2021. This means that asset managers and other market participants had to wait more than a year before they knew what to disclose in which format to comply with the SFDR. The clarification on measures and content may lead to the reclassification of some funds

By observing the current trends in the European fund industry, I have the feeling that sustainable investment strategies will become increasingly focused on environmental aspects—the E in ESG—instead of taking a holistic view. This trend is obviously driven by the decision of the EU Commission to focus its action plan on financing sustainable growth on environmental aspects, as the EU wants to be the leading economic area with regard to the reduction of greenhouse gas emissions in the fight against climate change. This is not only true when it comes to fund launches—even established funds are getting repurposed to meet

The EU action plan for financing sustainable growth was set up to boost the role of the finance industry in achieving a well-performing economy that delivers on environmental and social goals defined in the EU’s 2030 targets, which are outlined in the so-called Paris Agreement. Since this effort needs an expected investment of around €180 billion a year, it is clear that the EU Commission needs to connect the finance industry with the specific needs of these goals. The first paragraph of the chapter reorienting capital flows toward a more sustainable economy within the renewed sustainable finance strategy and implementation

As an increasing number of fund managers start to integrate ESG criteria into their portfolio management process, the potential to disappoint investors and fail to live up to their expectations increases. Investors who are buying a fund with a sustainable or ESG-related investment objective may think that these funds have a strong focus on all relevant criteria. But obviously this is not always the case, as all fund managers have different views on how to integrate non-financial criteria into their selection process. Some only focus on single aspects such as carbon emissions, while others focus more on social criteria or

Asset managers and investors are waiting for the new European Union Commission to be assembled because they want to know what they can expect from the new EU government regarding upcoming financial industry regulation. One thing that is already clear is the EU action plan on financing sustainable growth will be one of the drivers for new regulations. For example, the requirements with regard to reporting duties on sustainable activities will be translated into a formal format. In addition, it is also clear the current action plan was only the first step with regard to fostering sustainability within the financial

Now that the new European Parliament has been elected and the new members of the European Commission have settled into their new roles, market participants will become curious about what to expect from the new EU government regarding mutual funds. I expect that the European Securities and Markets Authority (ESMA) will start another review of the fees and expenses in the European fund industry, with a focus on performance fees and additional expenses that are not covered within the management fee. These types of fees are handled differently by the local authorities, which may hinder competition in the European fund

The European Commission has started an ambitious initiative with the commission action plan on financing sustainable growth. Even as this initiative was welcomed at the top level of the wider financial industry, there was some resistance with regard to the reporting duties for asset managers and mutual funds mentioned in the proposal. As a consequence of this resistance, the European Parliament dropped some of the more wide-ranging amendments favorable to conventional asset managers at a vote on March 28, 2019. Even as the members of the European Parliament (MEPs) voted for a unified classification system—the so-called taxonomy of sustainable economic

Following the news about product releases and trends in the European fund industry, one may get the impression sustainable investing is the new hot topic in the industry since there are funds with a sustainable investment objective launched every week. Some observers may already see an inflationary use of the terms environmental, social and governance (ESG) and socially responsible investing (SRI). In addition to the specialist funds, an increasing number of asset managers state they have the so-called non-financial data integrated into their research and portfolio management systems so analysts and portfolio managers can use the data within their decision-making