FRANKFURT: European asset managers overseeing US$22 trillion (RM91.71 trillion) have little hope of meeting a Jan 1 deadline to correctly label the sustainability of their investment funds, according to the group representing them.
The European Fund and Asset Management Association (Efama) said the industry isn’t being given enough time to adapt to so-called Regulatory Technical Standards, which have yet to be published in full.
And in the absence of clear guidance, fund managers may choose to declare that no investment product is sustainable under EU criteria.
“The only proportion that we could disclose is zero,” Dominik Hatiar, regulatory policy adviser for sustainable finance at Efama, said in an interview. “That would be the safest approach.”
Without having seen the new standards, which will provide more granular detail on how to interpret the green taxonomy that underpins European sustainability regulations, asset managers “don’t know what is in the denominator, we don’t know what’s in the nominator, we don’t know how to calculate this number,” Hatiar said.
It’s the latest sign that the Sustainable Finance Disclosure Regulation (SFDR) – Europe’s landmark anti-greenwashing rulebook for the investment industry – is continuing to cause anxiety among asset managers.
Introduced in March, SFDR is still undergoing adjustments and refinements, such as the Regulatory Technical Standards.
European authorities had intended to provide a complete draft of RTS in late September or early October but the complexity of the task has caused delays. Questions that have yet to be resolved include how to treat sovereign bonds.
And the longer asset managers have to wait for RTS, the less time they’ll have to figure out the taxonomy-aligned sustainability of their funds by the Jan 1 disclosure deadline.
“For your Jan 1 disclosures, you need to be making those filings now,” Hatiar said.
At the same time, RTS isn’t due to be formally implemented until July 1, half a year after Europe’s asset managers must declare how environmentally sustainable their funds are.
European regulators, meanwhile, are signalling they’re unlikely to budge. That’s as focus on greenwashing intensifies and lawmakers look to rein in the booming market for environmental, social and governance investing after years of unfettered growth.
Hatiar said Efama has suggested a workaround that might help the fund management industry cope with the EU’s adoption timeline.
The deadline might work, he said, provided managers are allowed to add disclaimers to their product disclosures, to explain how they arrived at a given sustainability ratio.
Ideally, Hatiar said the EU should push the Jan 1 implementation date for investment product disclosures back to 2024, which is what the European Commission did for financial institution-level reporting requirements.
The European Securities and Markets Authority (Esma) told Bloomberg that it and the EU’s two other financial watchdogs “aim to deliver” the Regulatory Technical Standards to the European Commission “soon.”
Once approved by the EU Commission, RTS will still need to be cleared by Europe’s parliament and council.
Esma said that in the meantime, asset managers can turn to more general instructions that have been available since last year to help them “make the appropriate product disclosures.” — Bloomberg