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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. Hortense Bioy, Head of SustainableInvesting at Morningstar Sustainalytics, told ESG Investor that most of these name changes will take place over the next month.
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. That may be a factor, but the real issue is the difficulty in defining sustainableinvestments.
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. billion over the past three months.
Although there is a lot of data out there, once you start digging into it, you find out its not necessarily consistent, and there are challenges cleaning it, he said, acknowledging that standard setters have a role to play by ensuring their definitions and tagging of nature-related information and data is consistent.
Efficient, reliable and trusted benchmarks can cut the cost of sustainableinvestment, as they allow passive, index-based strategies to support sustainableinvestment objectives. Passive funds, she said, account for roughly 40% of all US sustainableinvestment assets under management.
So, we definitely recognise that there are multiple facets. Obviously, you’re acting on behalf of your investors when you’re making that vote.” In part, because that tends to be a very strong driver of where the firm will continue to invest moving forward.
With various regulatory bodies globally initiating consultations on ESG ratings and data, regulation is definitely on the way. This explainer considers whether new rules will help investors to better understand what is behind ESG ratings and use them effectively to implement sustainableinvestment strategies.
“Finding investible projects can be a challenge. There is sometimes a lack of projects with the scale and risk/return profile to attract institutional investment,” said Laura Kaliszewski, Global Head of Client SustainableInvestment Solutions, at Natixis Investment Management.
“Biodiversity in rural England is clearly not the same as a Brazilian biome, and [companies in each region] have vastly different potential risks and impacts,” notes Aela Cozic, SustainableInvestment Analyst and Portfolio Manager at UK-based investment manager Fidelity International.
The UK’s HM Treasury then published a roadmap to sustainableinvesting in which it confirmed that the government was considering bringing relevant firms into the scope of FCA authorisation and regulation. IOSCO regulatory recommendations. Lack of transparency about the methodologies underpinning these ratings or data products.
The climate data challenge is one of definition as well as collection. Much depends on the region the corporation operates in, as well as its data analytics capability, as to whether it can supply close-to-perfect data in a timely and available manner,” she added.
As a result, the proposed definitions for the purposes of the regulatory regime seek to cover both form and substance: An ESG rating being defined as an assessment regarding one or more ESG factors, produced in the form of an ESG opinion, an ESG score or a combination of both, whether or not it is characterised as an ESG rating.
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