European ESG trends roundtable: Regulatory changes & global sustainability

Experts explore the European ESG landscape, highlighting regulatory changes, best practices, challenges and the potential global impact on sustainability and corporate responsibility.

  • Rhyadd Keaney-Watkins, head of ESG, Arjun Infrastructure Partners
  • Maria Merry del Val, director–ESG, Apex Group
  • Sondre Myge, head of ESG – SKAGEN Funds
  • Sébastien Thévoux-Chabuel, head of responsible investment, Comgest
  • Frédéric Vonner, sustainable finance and sustainability leader, PWC Luxembourg

Environmental, social and governance (ESG) considerations have dramatically influenced the financial and regulatory landscape over the past decade, particularly in the European Union. As the world grapples with pressing challenges like climate change, ensuring sustainable practices and transparent reporting have never been more essential. This comprehensive roundtable discussion gathered insights from some of the EU’s most influential voices in the ESG sector. They dissected the European regulatory shifts, tackled the pressing issue of greenwashing and delved into the roles of governments and the financial sector in achieving global sustainability targets.

ESG landscape evolution

The roundtable discussion started with a focus on how the ESG landscape has evolved in Europe recently and how the challenges and investment trends will shape its future. Maria Merry del Val, director–ESG, Apex Group, spotlighted Europe’s increasingly influential role in crafting the gold standards for global ESG benchmarks. Amidst the challenges, she identified a silver lining: there’s a substantial growth in active ownership that seeks to generate, measure and prove positive impact, particularly noticeable in the realm of private equity, signalling that ESG could have become a “hygiene” exercise and that a more engaged and responsible investment approach is looking to move the needle.

Rhyadd Keaney-Watkins, head of ESG, Arjun Infrastructure Partners, delved deeper into the world of ESG funds, presenting a multi-faceted perspective. He dissected the ever-expanding universe of ESG labels, noting a widening gap between funds that integrate ESG considerations and opportunistic entrants. He highlighted how the ability to deliver sustainability outcomes differs significantly across asset classes, with alternatives such as private infrastructure presenting an opportunity for investors looking for measurable impact. “While the rise in AuM of ESG strategies is positive, the quality of ESG funds can differ significantly. As ‘ESG integration’ has become a requirement for many institutional investors – particularly long-term investors, with long-dated liabilities and increasing expectations from beneficiaries on non-financial outcomes – it has also attracted players with a more superficial commitment,” he noted.

Shedding light on another dimension, Frédéric Vonner, sustainable finance and sustainability leader, PWC Luxembourg, flagged the ambiguity surrounding label certifications and regulations. He argued that this grey area muddies the waters regarding product comparisons, potentially leaving investors in a quandary. Beyond just focusing on the popular topic of decarbonisation, he championed a more holistic approach to sustainability: “While reducing our carbon footprint is undoubtedly crucial, we cannot afford to sideline equally pressing issues such as biodiversity conservation.”

Sondre Myge, head of ESG – SKAGEN Funds, took a step back to paint a broader picture, drawing attention to the seismic economic shifts underpinning ESG factors. No longer just an ancillary consideration or a peripheral add-on, ESG, in his view, has earned its place at the business strategy table. “While academic circles might still harbour reservations about green investments, the commercial world is voting with its feet, and the ascendancy of ESG’s role in decision-making is unmistakable,” he observed. Sondre Myge further suggested the financial sector should lean more towards holding brown assets, emphasising active ownership and driving genuine change: “Without such shifts, ESG risks becoming an irrelevant strategy in financial markets.”

“While academic circles might still harbour reservations about green investments, the commercial world is voting with its feet, and the ascendancy of ESG’s role in decision-making is unmistakable”

With a retrospective lens, Sébastien Thévoux-Chabuel, head of responsible investment, Comgest, explained his three “ESG tsunamis” framework to trace the evolution of ESG over the recent years. First was the “ESG mania”, when ESG transitioned from an optional extra to a central business tenet. This gathered steam after the Paris Agreement and peaked in the run-up to Glasgow’s COP 26. The second tsunami was the “unravelling of ESG regulations”, which began in 2020 and peaked in 2023. Starting in 2021, the last tsunami is “ESG litigation”. It is gently gathering momentum, and we may not see its peak before 2 to 3 years. “To navigate these big waves, the emphasis should be on accurate, well-documented and evidence-backed communication to sidestep potential legal and commercial hurdles,” he noted.

In a subsequent intervention, Sondre Myge identified a potential pitfall. He expressed concerns that in the race to roll out ESG products, the foundational and invaluable relationship between asset managers and their investors might get sidelined. “It’s this very bond,” he argued, “that holds the key to authentically realising and cementing ESG benchmarks.”

Frédéric Vonner in on the intricacies of Article 8. He detailed the mounting pressures businesses confront, where the challenge isn’t merely about setting lofty goals but equally about consistently showcasing their achievement. In his view, achieving transparency is a journey, not a destination.

Maria Merry del Val, revisiting the conversation, provided insights into the SFDR’s genesis. She clarified that its initial conception was never a labelling mechanism. “Yet, market dynamics wrongly used it as a labelling system, indicating investor appetites for Article 8 or 9. Today, the SFDR’s role is shifting to what it was originally defined for, and investors are scrutinising the underlying strategy beyond the classification more,” she mused.

“Today, the SFDR’s role is shifting to what it was originally defined for, and investors are scrutinising the underlying strategy beyond the classification more”

Concluding this discussion segment, Rhyadd Keaney-Watkins turned the spotlight on a recent Morningstar analysis. The findings, he shared, were revelatory: numerous ETFs marketed as ‘anti-ESG’ hold stocks commonly held by ‘ESG ETFs’. The investment thesis no doubt differs, and anti-ESG funds may adopt certain voting strategies, but fundamentally, there are many commonalities between the top holdings. He also challenged the veracity of current media commentary regarding ESG and the notion that there is a universally accepted definition of what ‘integrate ESG’ means: “The ESG tapestry is rich, complex and layered. The recent debate on ESG has centred on the exclusion of fossil fuel investments or shareholder activism. But for the most part, and certainly in private alternatives, integrating ESG is founded on the principle of managing environmental, social and governance factors that may influence an investment’s valuation or commercial performance. A simple objective I’m sure all long-term investors can agree upon.”

SFDR and transparency

Navigating the ever-evolving European ESG landscape, especially in the light of the Sustainable Finance Disclosure Regulation (SFDR), presents unique challenges and opportunities. The panellists answered how this regulation had shaped ESG fund transparency and the implications for European investors.

Frédéric Vonner’s take on this transition emphasised the increasing demand for transparency from regulators and investors. “SFDR’s promotion of transparency isn’t just a top-down regulatory directive. It mirrors a grassroots demand from discerning investors increasingly conscious of where and how their money is invested,” he elaborated. Frédéric Vonner ventured further into the technicalities, spotlighting the challenges of ensuring disclosure coherence. Given asset managers’ varying methodologies, achieving uniformity and consistency remains an uphill task. “SFDR’s vision is clear and laudable, but its real-world execution reveals intricate complexities,” he commented.

“SFDR’s promotion of transparency isn’t just a top-down regulatory directive. It mirrors a grassroots demand from discerning investors increasingly conscious of where and how their money is invested.”

Maria Merry del Val, resonating with Frédéric’s observations, reflected on the journey from an ambiguous regulatory environment to the present structured framework. “The rules we navigate today, albeit demanding, provide a blueprint. They act as the guardrails guiding our journey towards sustainable investment,” she explained. Maria also offered a forward-looking perspective, hinting at a welcomed “data deluge” expected in the upcoming months. For her, the true challenge lies at the intersection of regulatory ideals and on-the-ground realities. “Smaller entities, with limited resources, grapple with aligning their aspirations with the stringent SFDR guidelines,” she noted.

Sébastien Thévoux-Chabuel, broadening the discourse, presented a critique on prevalent misinterpretations. “It’s both fascinating and concerning to see the varied interpretations of SFDR among French asset managers,” he opined. His insights highlighted the pressing need for clarity in regulations so their essence isn’t lost in translation. Drawing attention to Article 9, he expressed surprise at the misaligned perceptions among industry players. “Clear regulations are a starting point, but collective understanding and harmonious implementation across the board are equally critical. From that perspective, SFDR has failed so far,” he stressed.

Shifting the focus towards private alternatives, Rhyadd Keaney-Watkins challenged some widely held beliefs in the industry. He emphasised that a myopic approach, which places Article 9 funds on a pedestal at the expense of Article 8 funds, does a disservice to the broader sustainability agenda with a risk of capital misallocation, which may hinder the transition of real assets. “Under the current regulations, it is only within an Article 8 fund that an ‘unsustainable investment’ can be held. However, for long-term and active asset managers, it is in the transition of assets from ‘brown’ to ‘green’ that significant impact and value creation can be delivered. Genuine sustainability extends beyond labels and narrow classifications,” he asserted.

Lastly, offering a touch of pragmatism to the discussion, Sondre Myge urged stakeholders to avoid viewing sustainability through a simplistic lens. “The sustainability journey isn’t a black and white, binary pathway,” Sondre reflected. He stressed that while regulatory frameworks like SFDR provide direction, there’s a real danger in reducing sustainability to a checklist. “We must recognise it as an evolving journey, one that demands continuous introspection, improvement, and adaptation,” he concluded.


In recent years, greenwashing –giving an unjustified green image to non-environmentally friendly products or practices – has become a focal point of contention. This issue’s significance extends beyond mere business ethics; it’s a concern that has profound implications for investors and regulators alike.

Rhyadd Keaney-Watkins explained the root causes of greenwashing, pinpointing the formative stages of ESG data and reporting as particularly susceptible. He remarked, “The fledgling state of ESG data leaves the door open for misreporting.” He expressed growing concerns regarding the influx of professionals entering the ESG space. While their intentions might be genuine, a lack of comprehensive understanding can inadvertently lead to greenwashing. “As the ESG field garners more attention, it’s imperative to ensure that standards are upheld, and labels are both accurate and meaningful,” Rhyadd Keaney-Watkins emphasised.

“As the ESG field garners more attention, it’s imperative to ensure that standards are upheld, and labels are both accurate and meaningful”

Sébastien Thévoux-Chabuel brought a unique perspective to the table, drawing parallels between greenwashing and Hannah Arendt’s idea of the “banality of evil.” He suggested that sometimes greenwashing isn’t born out of greed or a deliberate attempt to deceive but rather from a series of minor missteps or misunderstandings. “Just as Arendt postulated that ordinary individuals could commit great evils without malevolent intent, so too can greenwashing emerge from simple gaps in understanding,” he mused. Sébastien’s insight was that only very good internal governance can save asset managers from getting into the “ESG Bermuda Triangle”, where insurmountable challenges arise from opposing forces at the intersection of client demands, compliance needs, and ESG as an investment tool. 

Looking closely at fund structures, Maria Merry del Val shed light on some unintentional avenues through which greenwashing might manifest. She noted, “Greenwashing doesn’t always arise from a conscious effort to deceive. More often than not, it’s a by-product of the complex methodologies we employ and our natural inclination to showcase the best aspects of our investments.” Maria further delved into the nuances of comparing investments in publicly listed firms with those in the private equity domain, detailing that the yardsticks for green credentials might differ vastly across these sectors. 

“Just as Arendt postulated that ordinary individuals could commit great evils without malevolent intent, so too can greenwashing emerge from simple gaps in understanding.”

Wrapping up the discourse on greenwashing, Frédéric Vonner highlighted the challenges organisations face in sustaining their ESG commitments. He stated that any entity’s real test isn’t just initiating sustainable practices and maintaining and improving them over time. “Achieving sustainability isn’t a one-time endeavour. It’s a continuous journey demanding regular engagement, stringent operational processes and a genuine commitment,” he remarked. In his view, sporadic reporting and inconsistent efforts are pitfalls that can lead to perceived greenwashing and dilution of the core values an entity purports to uphold.

ESG collaboration

The fourth roundtable discussion question focused on the synergy required between governments and the financial sector in addressing hurdles related to funding, innovation and regulation. The goal? To empower companies in their pursuit of net-zero targets by 2030 and 2050.

Sébastien Thévoux-Chabuel began by emphasising the risks of a paralysing ESG backlash at a time of important elections in Europe, the UK and the US. “While achieving net zero may seem daunting… it’s a goal worth striving for,” he remarked. On the political divide regarding ESG, he touched upon the ‘cornucopian’ and ‘Malthusian’ worldviews, suggesting that these can influence regulatory attitudes. To close the gap between those two views, he cited “Michael Porter’s hypothesis” from the ’90s, which demonstrates the potential of environmental regulations to spark innovation when done right. 

Sondre Myge praised the EU’s Emission Trading System for its innovative approach to carbon pricing, facilitating long-term decisions for investors. He said, “A unified international carbon price aids investors in accurately assessing financial risks.” He highlighted the EU’s Green Deal and underlined its role in shaping industrial policies. However, his perspective was clear: “A net-zero portfolio is commendable, but the fundamental objective should be to enable genuine, meaningful economic transformation.”

Expanding upon Sondre’s insights, Maria Merry del Val expressed her apprehensions about the shifting priorities of CSR regulation. She stressed the necessity of “scientifically backed methodologies” that prove positive impact and pondered if the driving force in the future would be regulation or grassroots movements. “There are specific targets we must achieve, and the urgency cannot be understated,” she added.

Frédéric Vonner pivoted the discussion to the crucial role of education. He argued, “Everyone, irrespective of their industry or background, should comprehend the nuances and implications of ESG.” By introducing the complexities of new environmental issues, he underscored the importance of an integrated approach rather than constantly creating distinct frameworks.

Rhyadd Keaney-Watkins concluded the roundtable discussion by underscoring the importance of private capital. “Holding assets with transition intentions is vital,” he noted, stressing that the focus of regulations should be supportive and not punitive.

© 2023 funds europe



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