EU further delays sustainable finance rules for asset managers

European Union flags flutter outside the EU Commission headquarters in Brussels, Belgium May 5, 2021.

European Union flags flutter outside the EU Commission headquarters in Brussels, Belgium May 5, 2021. REUTERS/Yves Herman

LONDON, July 9 (Reuters) – The European Union has been forced to delay the second phase of landmark rules that require asset managers to show how they take environmental and other issues into account by a further six months to July 2022, an EU letter seen by Reuters said.

The delay comes as the volume of cash going into products that tout their ESG attractions has been accelerating, raising concerns among regulators about “greenwashing” or over-egged climate-friendly credentials.

The Sustainable Finance Disclosure Regulation (SFDR) imposes mandatory environment, social and governance (ESG) disclosure obligations.

In the teeth of heavy lobbying from the investment and funds industry, it was introduced in March this year as a central plank of EU measures to channel more investment into green products to help meet the bloc’s targets for cutting carbon emissions.

SFDR gives information on how managers take sustainabilitiy into account at the company and product levels, such as the risk of a product going down in value due to environmental impacts.

Market participants were required to apply them, even though detailed guidance on how to do this was delayed until January 2022 as the regulators writing them needed more time.

John Berrigan, head of the European Commission’s financial services unit, said in a letter to the European Parliament that a further delay of six months was needed to avoid a last minute rush for market participants.

“Due to the length and technical detail of those regulatory technical standards … we deem it necessary to facilitate the smooth implementation of the standards by product manufacturers, financial advisers and supervisors,” Berrigan said in his letter.

“We therefore plan to bundle all 13 of the regulatory technical standards in a single delegated act and defer the dates of application of 1 January 2022 by six months to 1 July 2022,” Berrigan said.

The Commission will work intensively to ensure the earliest possible adoption of the rules, Berrigan said.

The funds industry has called for the scope of the rules to be narrowed given that products without sustainability claims could be shunned by climate-conscious investors.

Reporting by Huw Jones; Editing by Giles Elgood

Our Standards: The Thomson Reuters Trust Principles.

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