Sustainable Finance –What the ESG legislative measures mean for asset managers
Investors have been driving the ESG agenda for some time and products labelled as ESG have been growing as a result. With that growth comes questions around whether investors are getting what they think they are and how do they benchmark ESG products against each other. These questions, together with a commitment to use the financial sector to direct investment into sustainable activities, are key drivers of new legislative developments that will impact all asset managers.
Sustainability has also become a focus for governments and regulators. In 2015, the UN adopted the UN 2030 Agenda and Sustainable Development Goals to promote sustainable growth and sustainable consumption. Following this, representatives from 195 nations came together with the objective of strengthening the response to climate change by making finance flows consistent with a pathway toward low greenhouse gas emissions in the Paris Agreement. The EU followed this with the establishment of its own high level expert group with the aim of identifying how sustainability could be integrated into its regulatory and financial policy framework. This resulted in the publication of the EU Action Plan on financing sustainable growth, which has at its core a belief that financial services can play a key role in the transition to a more sustainable economy by redirecting capital flows towards sustainable investments.
The resulting legislative package will set a common understanding of what constitutes sustainability, will require sustainability to be considered in the investment process, require sustainability considerations to be included in operational and risk considerations and drive transparent disclosures to investors. Asset managers will have to consider environmental, social and governance factors when investing, with the aim of achieving tangible results in the fight against climate change and social inequality.
View the full overview briefing here: “Sustainable Finance –What the ESG legislative measures mean for asset managers“