It was not surprising that H1 2022 was in general a negative period for the European fund industry given the geopolitical situation in Europe, the still ongoing COVID-19 pandemic, disrupted delivery chains, rising inflation, increasing interest rates, and the sluggish market environment. Within this market environment and given the economic uncertainties, one would expect that European investors sold long-term funds and bought money market products. Therefore, it is somewhat surprising that European investors sold money market products, which are normally considered safe-haven investments. Note: As this report also covers markets outside the EU, such as the UK and Switzerland, a

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

The EU green taxonomy is one of the main pillars of the sustainable investing framework in the EU. The purpose of the taxonomy is to define which business activities and sectors can be considered as sustainable. That said, the current proposal to classify nuclear and gas as green energy sources—since they can be seen as transitional technologies to bridge the gap between the current and future energy demand and the lack of the availability of renewable energy sources for the time being—is putting the credibility of the EU action plan for financing sustainable growth under scrutiny. The possible inclusion of

Environmental, social and governance (ESG) was one of the major drivers for the growth of the European fund industry over the course of the year 2021. The new EU regulations based on the Action Plan on Financing Sustainable Growth by the EU Commission drove these developments. The plan of market regulators to have all regulations, a taxonomy, and the respective technical standards in place by the end of the year 2021 failed, as the technical standards need to fulfill the reporting duties for the implementation of the EU taxonomy were delayed twice over the course of the year. The lack

After the launch of the International Sustainability Standards Board (ISSB) at the United Nations (UN) Climate Summit (COP26) in Glasgow, the International Organization of Securities Commissions (IOSCO) reached another goal by publishing its “Environmental, Social and Governance (ESG) Ratings and Data Products Providers” report. This report contains recommendations for regulators, ESG data and rating providers, and the users of ESG data and ratings. This report is appreciated by participants from all parts of the investment industry, as the recommendations section starts with a proposal that regulators could consider focusing greater attention on the use of ESG ratings and data products

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

Transparency is one of the best ways to build trust between a customer and a corporation. Since this is quite old guidance, one might be wondering why the financial industry in general, and the fund management industry in particular, are so reluctant to offer the most transparency possible to their investors. Managing money for a client is a very sensitive task that needs a large amount of trust. This becomes especially true for sustainable investment strategies such as ESG or impact investing, because these strategies are often based on the values and beliefs of the investor. In addition to this,