sustainable finance

As Europe’s watchdogs tighten scrutiny on Article 8 funds, managers must now defend their classifications or risk being challenged across EU markets.

Demonstrating the impact of sustainable investment remains a significant challenge, according to participants involved in producing a joint report by the Luxembourg Sustainable Finance Initiative (LSFI) and PwC Luxembourg.

LuxFlag’s Sustainability Investment Week (LSIW24) kicked off on Tuesday, with several speakers sharing their relative optimism around commitments to ESG and impact investing.

Sebastiaan Hooghiemstra at Loyens & Loeff reviews the opinion tabled by the EU’s supervisory agencies on SFDR as a possible labelling regime, and finds that the question on whether “Article 8” and “Article 9” products should be abolished, is not yet off the table.

Fears in the financial sector that the reputation of institutions - banks as well as fund managers - might suffer as an indirect consequence of stringent sustainable finance regulations might deter firms from developing new ESG products or could make them reluctant to finance companies that claim to be green or sustainable.

The impending climate crisis is claiming ever-more attention on the political level. Part of the solution to it will be to spend what’s estimated to be trillions per year on cutting and mitigating emissions. The ability of the financial industry to raise and allocate money has got the political classes’ attention. Former US presidential candidate John Kerry – now the United States’ first-ever special presidential envoy for climate  –  and Luxembourg financial minister Yuriko Backes on Wednesday discussed Luxembourg’s role.

Boards of AIFMs, Alternative Investment Fund Managers, in Luxembourg are “heavily concerned” over potential greenwashing, a survey conducted by PWC Luxembourg on behalf of the Luxembourg corporate governance institute ILA said. 

Banks, not investment funds, are responsible for financing the most carbon-intensive activities, the European Central Bank has concluded on the basis of experimental new indicators for sustainable finance. “The companies they finance produce relatively more emissions in their business operations to achieve a given level of revenue,” the ECB said when presenting the new indicators on Tuesday.

How asset managers vote on corporate resolutions every year determines the future of our planet, but the world’s very biggest investment corporations continue to block progress on environmental and social issues. 

Researchers from non-profit organisation Share Action, in the latest edition of the Voting Matters report released this week, outlined how 68 of the world’s largest asset managers voted on 252 ESG-related shareholder resolutions. 

Luxembourg’s financial supervisors are preparing for tough scrutiny of the annual reports that firms will produce in the coming months. The 2022 reports are required to elaborate in detail on the impact of climate change, on the financial fallout from the Ukraine war and on the effects of inflation and rising interest rates.