sustainability disclosure

As Europe seeks ways to address greenwashing, supervisors have proposed broad reforms to the Sustainable Finance Disclosure Regime (SFDR). To enhance transparency, they propose stricter labelling. Together with the addition of a transition investing category, these changes could redefine sustainable investing.

In the apparently almost never-ending battle against greenwashing, the European Securities and Markets Authority (ESMA) set a next step by publishing, on 21 August 2024, its new guidelines on funds’ names using ESG or sustainability-related terms (the Guidelines).

Fund managers across Europe can opt for a label to certify their investment product does what it says it does. The Luxembourg Finance Labelling Agency, also known as Luxflag, has certified some 365 funds, mostly with an ESG label. Luxflag chair Denise Voss spoke to InvestmentOfficer.lu for a podcast.

“A label is about certifying or giving clarity to investors, that what they invest in, is what it says on the tin. We’re actually not saying you must invest in this or that,” said Voss. 

Not all European regulations are good. Under the Sustainable Finance Disclosure Regulation (SFDR), part of the EU Green Deal, asset managers must disclose information on sustainability. The objective is thus more transparency and openness in this area. However, from the start the directive was used as a means to classify funds.

With a warning against excessive regulation, and a call to action on green investing, CSSF director-general Claude Marx, made a typically colourful intervention at Monday’s virtual ALFI conference. He also gave some details of planned local regulation of teleworking arrangements.

Alfi has asked the European Commission to delay the implementation of new rules on the disclosure of the sustainability of investments by 9 months to 1 January 2022.

According to the regulation on sustainability-related disclosures, which is supposed to come into force in March 2021, investors are required to publish information about the sustainability and climate risks of all their investments.