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Efama warns of EU green taxonomy effect on real estate

green_housingThe European trade association for fund firms says the EU Taxonomy on sustainable finance could adversely affect the development of ‘green’ housing.

The European Fund and Asset Management Association (Efama) said the taxonomy was “critical” for the development of sustainable finance in Europe but that it could cause problems for real estate developers looking to reduce their carbon footprints using finance from green bonds. 

The proposed criteria for construction, renovation and ownership of buildings needs to be revised, Efama said. 

“The current proposal would be detrimental to the decarbonisation of the EU´s building stock by restricting the issuance of taxonomy-aligned green bond volumes,” Efama said in a statement. 

“The stringency and lack of economic viability of the criteria would be particularly counterproductive for the covered bond and green mortgage bond markets.”

Efama also pointed out that due to the current data challenge regarding ESG – or environmental, social and governance – the current timeline for application of taxonomy disclosures poses a serious challenge.

It said that most companies will be unlikely to implement the new disclosure requirements in January 2022 and recommended readjusting the disclosure timelines.

Also, in order to address the ESG data challenge, Efama wants the European Commission to prioritise an extension to the scope of non-financial reporting and to develop European reporting standards, among other measures.

Efama recently joined the French and Dutch financial market authorities in calling for a European regulation of ESG data, research and ratings in a bid to help stamp out issues such as ‘greenwashing’.

This comes as European asset managers are said to be observing double-digit growth in the demand for ESG investments.

Giorgio Botta, Efama’s regulatory policy advisor, said asset managers wish to encourage the ongoing ESG trend by expanding their offering as well as providing “trustworthy and comparable” information to combat greenwashing and enhance transparency.

“To fulfil these objectives, investors need solid and reliable data. Given the lack of publicly available information, asset managers are heavily reliant on the information from third-party providers of ESG data, research and ratings, which comes with high costs and many questions,” Botta added last Friday.

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