Dutch pension fund manager APG, one of world’s ten largest asset managers with some 576 billion euro under management, on Wednesday took aim at the way that the European Union is implementing its increasingly stringent requirements for sustainable, ‘dark green’ investment funds, also known as impact funds, at a time that reliable data is not yet readily available.
The EU approach to green finance was discussed in Paris on Wednesday at the World Pensions Council conference. Pension fund APG believes EU approach has introduced “commercial incentives to go dark green”, exposing the industry to greenwashing risks. “I am not convinced that all the rules and regulations get the industry to do the right thing,” said Gert Dijkstra, senior managing director at APG.
In practice, Dijkstra noted that the asset management industry is being encouraged to make its investments more sustainable while the companies in which they can invest are not yet required to report their sustainability impact before 2025.
The EU›s sustainable finance regime includes the widely discussed EU taxonomy as part of Sustainable Finance Disclosure Regulation - already applicable - and the Corporate Sustainability Reporting Directive - due to enter into force in 2025. Companies from that year onwards wil be required to report sustainability data the same way they now report financial data.
‘Avoid being accused of greenwashing ’
APG is not the only asset manager voicing concerns. Several others, including BLI in Luxembourg, in recent months have also said that the current legal regime is particularly challenging because reliable corporate data is not widely available.
Asked by Investment Officer to respond to these concerns, Patrick de Cambourg, chairman of the EU Financial Taskforce on Sustainability Reporting Standards, advised asset managers to be “very careful” when preparing sustainable funds. His taskforce last month completed the new non-financial corporate reporting standards.
“The biggest challenge for asset managers is to avoid being accused of greenwashing or ESG washing,” De Cambourg told the conference. “Sometimes the border between a fair and neutral explanation of what you do, and marketing yourself as a green product or a socially responsible product, is seen.”
Landscape is going to change
“The landscape is going to change because preparers are going to offer reliable data on which you can work from, but in the meantime, please be careful with what you’re saying,” said De Cambourg, who also is honorary chair of French investment bank Mazars.
“In practice it is challenging. The burden of regulation will not help us to speed up,” APG’s Dijkstra said. “We cannot yet offer dark green, it’s an incredible challenge, We will get there but not today.”
Although there was some criticism over the way that increasingly stringent regulations for green investments are being implemented in Europe, panellists at the pensions conference were united in their view on the need for sustainable finance and increasing recognition of Environment, Social and Governance, or ESG, in finance.
Nicholas Sherry, chair of TWUSUPER, the largest ‘Superfund,’ an Australian pension fund for transport and logistics workers, with 4.8 billion Australian dollars in funds under management, said sustainable finance and ESG can no longer be ignored. “The views in the community have changed,” he noted.
Australian funds still investing in coal exports
That said, he told the conference that pension funds in his country will continue to invest in Australian coal “as long as coal-fired power plants are still being built” as is for example the case in China, a major importer of Australian coal. “This will continue until the judgement point has been reached.”
Sherry, a former trade union official and government minister who has played a key role in creating Australia’s pension system in recent decades, said that pension funds in his country operate under the theme of “invest, engage and change,” which encourages them to invest in wind and solar power. Although they invest in coal production, the funds do not invest in oil and gas power in Australia, he said.
Related articles on Investment Officer Luxembourg:
- Managing impact funds is a balancing act, says BLI’s Drui
- In Flux: New landscape emerges for fund data
- BlackRock’s clients ask for portfolios in line with SDGs