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Funds data and analytics provider Morningstar Sustainalytics predicts that between 30% and 50% of in-scope funds will change name as a result of ESMAs new guidelines. New EU funds have had to comply with these guidelines since last November, while existing funds have until 21 May to consider whether they need to change their name.
One such, unheard of a few short years ago, is “greenwashing”, the practice of dressing up products, services or investments as being in full conformity with ESG principles – in contradiction of the underlying reality. It may be a bit strong to say firms are fearful of being accused of greenwashing. Acting in good faith.
ESG ratings are questioned, accusations of greenwashing are proliferating, and debate about the purpose and integrity of ESG investing is ongoing. Legislation is being developed to address greenwashing, along with tighter regulations around auditing and verification. . This often leads decision-makers to focus on the wrong question.
“Ever since SFDR was introduced, there has been the demand for more clarity and legal certainty.” Speaking to ESG Investor , Hortense Bioy, Global Director of Sustainability Research at data and analytics provider Morningstar, agreed that investors want “clarity, simplicity, and minimum safeguards”. billion over the past three months.
In such a crowded market, there are no standards for disclosure, transparency and quality, which raises concerns that greenwashing may go undetected. With various regulatory bodies globally initiating consultations on ESG ratings and data, regulation is definitely on the way.
Sindhu Krishna , Head of Responsible Investment at pensions provider Phoenix Group, and a spokesperson for the alliance working group that produced the report, said: “ESG benchmarks have definitely come a long way. Kuh said that the issue of greenwashing is being addressed. The main limiting factor is availability of data.
Researchers said their results should be treated as initial rather than definitive because of the short period covered (2017-2019). A separate study by global risk analytics company Verisk Maplecroft found that social factors are now having almost as much impact on sovereign debt pricing as governance factors. Transition challenges.
What a company considers "agroforestry" also can be squishy, she points out — a situation that makes her and other climate advocates worry about companies using the term to "greenwash," or essentially pretend to be environmentally friendly without making substantive change. There is no clear definition. What is agroforestry?"
In addition, the lack of standards in this area increases the risk of ‘greenwashing’ or misallocation of assets and could lead to a lack of trust in ESG ratings or in the data products’ robustness or relevance. sustainability-related disclosures for asset managers, including ‘greenwashing’, and.
Bringing ESG ratings providers into regulation will boost investor confidence, reduce greenwashing, and address the lack of transparency highlighted in responses to the governments consultation.” For example, the ESG rating definitions referred to above align with International Organization of Securities Commissions (IOSCO) standards.
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