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According to the FCA, the new rules come as investors increasingly seek investments with positive environmental and social impact, with global AUM in ESG-oriented funds anticipated to grow to $36 trillion by 2026, while around 70% of investors report lacking trust in the sustainability claims of investment products.
The labelling regime introduced four labels – including Sustainability Focus, Sustainability Improvers, Sustainability Impact, and Sustainability Mixed Goals – intended to help consumers to differentiate between the sustainability objectives and investment approaches of investment products, along with criteria for the use of each label.
Switzerland’s Federal Department of Finance (FDF) announced today that it will proceed with plans to propose regulations to address greenwashing in the financial sector, including investment and disclosure rules for financial products using labels such as ‘sustainable,’ green,’ or ‘ESG.’
The investment manager also admitted in a hearing in court that it had made false and misleading claims about the fund. The court found Vanguard guilty of making misleading claims in March 2024, advancing the case to consider penalties. At the penalty hearing, ASIC sought penalties of A$21.6
Global investor interest in sustainableinvestments has continued to rise in the past few years, with 54% of investors anticipating increasing their sustainableinvestments portfolio in 2024, according to a Morgan Stanley survey. Read the full story at ESG Dive.
By: Priyanka Bawa , Senior Analyst in the Verdantix ESG & Sustainability practice Despite more net zero targets being set than ever before, and more science-based targets being used to back them, 2022 research from South Pole shows that one in four businesses do not intend to talk about their science-aligned climate targets.
Investment in adaptation offers significant opportunities that are yet to be comprehensively tapped,” said Rena Pulido, Head of SustainableInvestment Australia at IFM Investors, a A$221.7 It will be important for taxonomies to include adaptation to further mobilise much needed investment in adaptation,” she told ESG Investor.
The Financial Conduct Authority (FCA) has published its much-anticipated consultation outlining measures to tackle greenwashing, including the introduction of three categories for sustainableinvestments. Greenwashing misleads consumers and erodes trust in all ESG products,” said Sacha Sadan, FCA’s Director of ESG. .
The European supervisory authorities (ESAs) and EU national competent authorities (NCAs) will need to build out their in-house resources and skill sets to effectively identify and handle instances of greenwashing by financial institutions, but greater guidance is recommended by observers rather than new waves of regulation.
Between January 2020 and December 2021, the EU watchdog identified 191 European companies involved in 933 misleading communication incidents – 70% of which involved greenwashing. However, ESMA’s guidelines also require a more general alignment with environmental or social characteristics, or a sustainableinvestment objective.
Based on new underlying European Sustainability Reporting Standards (ESRS), the CSRD introduces more detailed reporting requirements on company impacts on the environment, human rights and social standards and sustainability-related risk.
The net outflows in Q4 were largely driven by US investors, who pulled a record US$5 billion from US sustainable funds in the quarter. The US Securities and Exchange Commission (SEC) adopted a new ‘Names Rule’ last September to improve accuracy and reliability of the naming of investment funds. trillion globally.
The group’s latest report, “ A world in balance 2024:Accelerating sustainability amidst geopolitical challenges ” tracks advancements in organisations’ environmental and social sustainability over the last three years.
The EU Green Taxonomy was designed to accelerate the flow of money into green companies and projects, while simultaneously protecting investors from greenwashing accusations. The CSRD has already been adopted and will kick in from reporting year 2024.
Asset managers require further support from the UK’s Financial Conduct Authority (FCA) to meet the Sustainability Disclosure Requirements’ (SDR) naming and marketing rules for green funds, despite recent flexibility. This means f und managers need to demonstrate that at least 70% of the fund’s assets support the selected strategy.
Levick added that several national entities, including the UK Infrastructure Bank and the British Business Bank plan to utilise the green taxonomy to guide investment decisions.
She encouraged investors to vote against directors’ re-elections and restrict new investments in firms that continue to be misaligned with the goals of the Paris Agreement. The NGO pointed to Shell’s plans to develop hundreds of new oil and gas fields.
Hundreds of RI funds have been winding down in the United States and Europe in 2024 alone, and product development slowed significantly in the first nine months of the year when, according to Morningstar data , 246 new funds came to market globally, compared with 444 over the same period in 2023.
The FCA’s SDR requirements were introduced by the regulator in November 2023 , aimed at helping investors assess the sustainability attributes of investment products, and to avoid greenwashing risk, to portfolio managers.
When the planets align, the sustainabilityinvestments yield meaningful emission reductions and a payoff for the owner. Investors are shopping for rental buildings In fact, there’s good evidence in both Canada and the United States that investment capital is now flowing into rental apartments at a pace not seen in decades.
Anti-greenwashing rules and guidance may become “diamond standard”. Anti-greenwashing guidance proposed by the UK Financial Conduct Authority (FCA), as well as the promise of extending the finalised Sustainability Disclosure Requirements (SDRs) to pension products, has been welcomed by the investment industry.
boards lose focus on ESG, say it’s not the same as sustainability; Microsoft to restart Three-Mile Island nuclear plant to decarbonize data centers; IFRS launches guide for voluntary application of ISSB sustainability reporting standards; Brookfield raises $2.4 This week in ESG news: U.S. Billion Air France-KLM Signs Deal for 1.9
Industry experts have stressed the need for simplicity and clarity around Europe’s ESG fund labelling, as the European Commission’s Sustainable Finance Disclosure Regulation (SFDR) consultation deadline looms. The SDRs were due to be introduced on 30 June, but following various delays are now expected in H2 2024.
Drastic changes to the scope of sustainability reporting rules will limit investor access to comparable and reliable sustainability data, said Aleksandra Palinska, executive director at the European SustainableInvestment Forum, Europes umbrella network for sustainable finance, in a press release.
While exceptions and compromises have been inevitably granted along the way , this effectively clears the way for the first-ever EU law to restore natural ecosystems – designed to implement measures to restore at least 20% of the EU’s nature on land, rivers, and seas by 2030 – subject to a final plenary vote in early 2024.
The global investment community is walking a “tightrope” between greenwashing and green blushing as it strives to stay abreast of regulatory developments that continuously ramp up accountability on sustainableinvesting, industry sources have sad. That pace of change is here to stay.”
Although the EU Taxonomy and SFDR were designed to increase transparency and reduce opportunities for greenwashing, it’s still early days, and there is much work to do. When it comes to sustainableinvestment exposure, asset managers should explain how they calculate it. What matters is transparency,” said Bioy.
Despite growing investor appetite, it is increasingly recognised by investors, intermediaries and regulators that the impact investing market is being held back by a lack of consensus on its definition, beyond the broadest of terms. ESMA plans to undertake further considerations for index and impact funds.
Originally published on bloomberg.com Green finance regulatory developments The 2023 United Nations Climate Change Conference (COP28) galvanized the energy around the global green finance agenda, setting the stage for a busy 2024 of green-related rulemaking and policy guidance for the financial services sector.
In this article, I’ll summarise key events defining 2022 and present four sustainability trends that will prepare you to create an impact in 2023. 2022 Sustainability Summary. In 2022, the voice against “greenwashing” practices was clear and loud. Sustainability trends 2023: Net-Zero roadmaps.
While a focus on ESG has been prevalent for some time now, this surge in interest has been fueled by Canada’s commitment to achieving net-zero emissions by 2050 and an increasing number of stakeholders who expect ESG considerations be integrated into their investment programs.
Proposed sustainableinvestment thresholds risk divergence from SFDR. Market participants have called for a delay to the European Securities and Markets Authority’s (ESMA) draft rules for sustainability and ESG fund labels until there is more clarity on terminology and interoperability with existing disclosure standards.
Renaming trend may lead to a short uptick in greenwashing, but ultimately will accelerate the path to net zero and offer sustainable investors more choice. The decision to rebrand a fund often raises eyebrows, with investors “intuitively suspicious” of the activity due to greenwashing concerns among others.
Under the EU Sustainable Finance Disclosure Regulation (SFDR) , Article 8 funds are meant to promote environmental and/or social characteristics, while Article 9 refers to products with sustainableinvestment objectives and which meet the standard of “do no significant harm”. in February 2024 compared to the previous year.
This week in ESG news: EU Parliament approves new anti-greenwashing law; investors urge Shell to set Paris-aligned climate targets; Barclays launches new sustainable banking, energy transition investment banking teams; PwC CEO survey finds companies upskilling workers for climate megatrend; Australia drafts law requiring mandatory climate reporting; (..)
In addition, while SFDR was designed to enhance transparency around sustainability, Article 8 and 9 disclosure requirements have been used “in marketing material as ‘quality labels’ for sustainability, consequently posing greenwashing and mis-selling risks”.
Nicola Williams, Partner at Eversheds Sutherland, says the UK’s proposal to regulate ESG ratings could support transformative sustainabilityinvestments. This year, the ban was lifted following significant investment aimed at overhauling the sewerage system and constructing large rainwater retention basins.
Key sources of greenwashing risk identified by the regulators included claims about sustainability impact and company engagement made by asset managers, litigation risk related to misleading ESG claims made by banks, and misleading product claims by pension and insurance providers.
Increased supervisory actions and better access to data and other resources will be required to address growing greenwashing risks at banks, investment firms and insurance companies, according to new reports released by Europe’s three primary financial regulatory agencies, the European Supervisory Authorities (ESAs).
The UK’s Financial Conduct Authority (FCA) was challenged during a parliamentary hearing on Wednesday, on the grounds that funds adhering to the regulator’s proposed rules for sustainability labels may be able to hold fossil fuel firms, some of which have recently rowed back on climate commitments.
Comparability across jurisdictions will: Offer the most cost-efficient solution for companies committed to transparent and robust reporting and minimize the opportunities for greenwashing. Provide the clearest possible picture to investors seeking the world’s most sustainable companies across markets and geographies.
The European Supervisory Authorities (ESAs) have issued a Call for Evidence to stakeholders on greenwashing. . The ESAs have also asked for any available data to help them gain a more concrete sense of the scale of greenwashing and areas of particularly high risk. .
Despite appearances, sustainableinvestments have quietly had a great year. Given the poor performance of green energy stocks and the chorus of opposition against anything viewed as “woke,” it’s easy to get lost in the narrative that the shine has worn off sustainableinvesting. But that’s not what I’m seeing.
Richard Hardyment, Head of Engagement at the Institute of Business Ethics, calls for a revolution in the mechanics of measurement to realise sustainable finance’s potential. There are accusations of greenwashing from one side, ‘wokeism’ from another, and a lingering question on everyone’s lips: is it making a difference?
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