Asset managers are urging Brussels to delay implementation of its landmark sustainable investing rules, arguing its deadline is too ambitious given the mammoth reporting task awaiting investment houses.
The European Fund and Asset Management Association has written to regulators asking for more time for the industry to gather information about the environmental, social and governance risks in their portfolios.
The resistance from the investment industry points to the gulf between policymakers’ ambitions for green finance and the thorny reality of implementing a new system from scratch. The European Commission has staked a large amount of political capital on developing the world’s first rulebook for sustainable finance.
A central plank of the EU’s push to fund the green transition, the ESG disclosure regulations aim to clamp down on “greenwashing” by forcing asset managers to provide clear information about the sustainability of their investments.
The rules are set to come into force in March 2021, a deadline that Efama describes as “unrealistic [and] clearly not feasible for the practical application of an entirely new and complex legal framework”.
The trade association, which is calling for a delay until January 2022 at the earliest, is concerned that many data points required by the regulations are not available. “Companies seem unaware of the new regulatory requirements and do not possess the necessary data,” it warned EU regulators in a submission seen by the Financial Times.
Efama is also worried that the EU’s delay in issuing final standards will not leave asset managers enough time to update investor factsheets, creating a regulatory bottleneck early next year as groups rush to submit revised documentation for approval.
“The rules have been drafted with no appreciation of the steps and timescales that we deal with,” said Will Oulton, director of responsible investment at First State Investments. He estimated that at least a third of the data asset managers were required to report on was unavailable.
However, some industry figures believe complaints over the deadline provide cover to ESG laggards who fear being exposed by the new disclosure rules.
“There are some people who are greenwashing and would like to see this regulation held up,” said Steve Waygood, chief responsible investment officer at Aviva Investors.
He added that implementing the reporting framework would help the data to emerge by prompting asset managers to demand ESG information from companies. “We will learn by doing.”
The commission said it was committed to its sustainable finance goals, but added it was “assessing different options to facilitate as much as possible the implementation of the new rules”.
The EU’s three financial regulatory agencies called on the commission this year to delay implementation.
Mr Waygood said asset managers needed to prepare for the March 2021 date but policymakers should accept that the first batch of disclosures would be imperfect. He said the EU should then review the regulation after a year to “clarify some of the more ambitious points”.
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