{"id":25712,"date":"2022-05-18T09:49:34","date_gmt":"2022-05-18T07:49:34","guid":{"rendered":"https:\/\/frankfurt-main-finance.com\/?p=25712"},"modified":"2022-05-18T09:51:59","modified_gmt":"2022-05-18T07:51:59","slug":"sustainable-investing-becomes-the-new-standard-of-capital-investment","status":"publish","type":"post","link":"https:\/\/frankfurt-main-finance.com\/en\/sustainable-investing-becomes-the-new-standard-of-capital-investment\/","title":{"rendered":"Sustainable investing becomes the new standard of capital investment"},"content":{"rendered":"\t\t
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Investors are taking the financing of the transformation of the economy into a sustainable and thus stable system in the long term very seriously: According to the BVI[1]<\/a>, more than 450 billion euros had already been invested in funds defined as “sustainable” by the third quarter of 2021, almost four times as much as a year earlier. A quarter of mutual fund assets is thus attributable to sustainable products. Scarcely anyone had anticipated such a rapid increase.<\/p>

For the first time in many years, there is therefore an investment theme with positive connotations that is popular with clients. Selecting shares and funds on the basis of environmental and social criteria as well as good corporate governance (Environment, Social, Governance, ESG) has become the standard.<\/p>

The big “but”: The regulators responsible for the financial market (EU Commission, ESMA, BaFin) have laid out a whole matrix of regulations on how sustainable asset management and funds are to be defined and what advisors must observe in connection with sustainable investment. The principal challenge here is that some of the regulatory frameworks will not fully come into force until end of 2022, or are even still being considered and amended, but advisors are already expected to communicate accordingly. In any case, it is becoming apparent that much will depend in the future on having access to accurate ESG data in order to comply with the various rules and regulations in the advisory process. With its already comprehensive integration of ESG data, Infront has laid the groundwork for this. ESG scores from Clarity AI, one of the world’s leading providers of sustainability and impact reporting, cover 30,000 companies and 20,000 funds. FMF member Infront helps clients adapt to the demand for ESG and the changing investment landscape, and meet regulatory requirements (more information<\/a>).<\/p>

Sustainable investing is becoming the new standard of capital investment. The EU’s regulatory initiatives provide the binding guidance framework for this – an overview of the status of key developments from an investment advisory perspective. Which ESG regulations are particularly important for advisors and investors? What will change in 2022 and 2023, and how do they mesh?<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Overview: Which sustainability regulations are relevant for which target groups?<\/figcaption>\n\t\t\t\t\t\t\t\t\t\t<\/figure>\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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EU Sustainable Financial Disclosure Regulation (SFDR)<\/h3>

In force since March 2021. Only asset management companies and funds classified under Article 8 or 9 of the EU Disclosure Regulation may be promoted as “sustainable” or have a direct targeted sustainability impact. Attention should also be paid to Article 7 of the SFDR, as from 30 December 2022 at the latest, the adverse impact on sustainability must be disclosed for all products. Planning is currently underway for Level II, the launch of which was recently postponed from July 2022 to January 2023. This will stipulate that asset managers and fund providers must also provide information on the impact of their investment strategy concerning ESG criteria in a reporting document. Asset managers must then maintain so-called qualitative reports on their individual products. In the final stage, scheduled to come into force from March 2023, regular ESG reports on asset managers and individual products must be made available with quantitative information.<\/em><\/p>

This should also make it possible to transparently track the actual sustainability impact of an asset management or a fund investment. However, the specifications for the published details and reporting sizes are currently still being finalized. From mid-2022, however, the SFDR classification should then combine the classification of investment processes with documentation of their impact on the portfolio. In the past, this was only possible individually through ESG seals on the one hand and ESG fund ratings on the other.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Overview: Article 6, Article 8 and Article 9 of the Disclosure Regulation<\/figcaption>\n\t\t\t\t\t\t\t\t\t\t<\/figure>\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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EU taxonomy<\/h3>

The EU taxonomy is lagging behind its own claims. Up to now, corresponding sustainable activities and technical criteria have only been defined for two of the taxonomy’s total of six environmental objectives. When the taxonomy is fully published, asset managers will have to verify if their investments are sustainable in the sense of the EU taxonomy. The roadmap for the application of the taxonomy is as follows:<\/p>