CFA Institute recently undertook a new survey on the current and future direction of the EU regulatory policy on ESG investing. Attached the report.
The goal is to gain deeper insights from CFA Institute members in the EU on the perceived benefits and challenges of
the EU legislation on sustainable finance, to propose solutions to address ESG risks and issues, and to offer regulatory recommendations to enhance ESG regulatory measures without weakening investor protection.
Key Findings
● EU legislative efforts on sustainable finance and the growing demand from European investors of sustainability investments have been the key drivers pushing asset managers to increasingly incorporate ESG factors into their investment strategies.
● The lack of reliable ESG data, the substantial costs for the collection of such data, and the need for personnel training on ESG incorporation and sustainability thinking represent the main challenges to implementing the SFDR and the EU Taxonomy for asset managers and companies.
● The excessive volume and intricacies of sustainability information are confusing retail investors, making it difficult for them to use such information to make sound investment decisions. The complexity of sustainability reporting is expected to increase significantly in 2025, when larger European issuers will begin reporting under the ESRS framework.
● EU legislators should focus on clarification of the language and terminology used in Articles 8 and 9 of the SFDR to enhance the quality of ESG disclosures and reduce the perception of greenwashing.
● The main challenges related to the EU Taxonomy Regulation are the complexity of disclosure information and the lack of qualitative and comparable ESG data. These issues are the primary obstacles to achieving the regulation's objectives and its effective implementation.
● ESG ratings are not considered helpful for investors because of the significant variance in outcomes and lack of trust in their methodologies.
● To mitigate greenwashing risks, global regulators could collaborate to find alignment on a common definition of sustainability and the compatibility of disclosure requirements. Furthermore, requiring full transparency of ESG ratings and methodologies and better clarifying key concepts within the EU sustainability-related rules can help reduce the perception of greenwashing.
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Jacopo Gadani
Vice President ESG Solutions
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