EU countries will not have long enough to implement sustainability rules into investment fund regulation, the asset management industry has warned Brussels.
The European Securities and Markets Association (Esma) is consulting on integrating sustainability risks and factors into the EU fund directives – Ucits and the Alternative Investment Fund Managers Directive – and into MiFID II, the directive that governs capital markets practices.
The European Fund and Asset Management Association (Efama) said the 12 months suggested by the European Commission to implement the changes would be “far too little time” given that changes in national laws had to take place first.
Efama made the comment in response to Esma consultation, but was broadly positive on the prospect for regulation as long as there was consistency between this and other consultation to do with sustainability risks in investment decisions and distribution processes.
Efama said it welcomed Esma’s “high-level-principles-based approach, which acknowledges the principle of necessary proportionality based on the firms’ investment strategy and underlying assets of each investment product”.
But the importance of ensuring a consistent application of this high-level approach among other current consultation processes when it comes to the integration of sustainability risks and factors in the investment decision and distribution processes is “essential to ensure that all parts of the investment chain pull in the same direction”.
Furthermore, a clear understanding of the notion of sustainability risk is critical, Efama said.
Tanguy van de Werve, Efama director general, said: “Esma’s high-level approach is a positive one as it ensures the level of flexibility required in view of the rapid market and regulatory developments in the area of sustainable finance. We consider that sustainability risks and related opportunities can be material drivers, and therefore important, alongside other factors, in assessing investment risks and opportunities.
“With this in mind, we call Esma to ensure that the notion of sustainability risk is to be linked to the financially material impact on an investment and that a consistent application among the different ongoing consultation and legislative process is in place.”
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