EU Asset Managers Will Need Two Ways to Brand Green Funds
EU Asset Managers Will Need Two Ways to Brand Green Funds
(Bloomberg) -- Asset managers operating in Europe will be required to use two different approaches when telling investors how green their funds are, one that includes sovereign debt and a second that doesn’t, under a draft proposal by supervisory authorities.
The so-called dual approach could put to rest concerns that investors will get an inaccurate picture of how the funds in which they invest match up with the European Union’s list of environmentally sustainable activities, amid concerns of green-washing.
Under the EU’s groundbreaking measures to address climate change, asset managers will be required to inform investors of the ratio of alignment with the list, or taxonomy. But regulatory guidance on the specific implementation was held up on debates over whether to include sovereign debt, because the taxonomy doesn’t include government services.
Market participants were split over whether to include government debt, with both sides arguing the end result would be confusing to investors. In its final report on draft Regulatory Technical Standards, published Friday, European authorities said they are proposing two key performance indicators, or KPIs, with and without sovereign debt.
That will “ensure transparency and comparability and enable investors to assess the proportion of investments aligned with” the taxonomy, according to the document. It also will at the same time avoid “the problem of perception that could otherwise arise because of potentially low KPIs where financial products have high exposures to sovereigns.”
The proposal still needs to be approved by the EU commission, parliament and council.
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