New ESG disclosure rules provide ‘too much information to investors’, says Investment Forum

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The European Sustainable Investment Forum (Eurosif) has voiced their views against new environmental, social and governance (ESG)-reporting rules proposed by the European Commission.

In April, the three European Supervisory Authorities (EBA, EIOPA and ESMA) invited comments regarding draft ESG-disclosure standards for financial market participants, advisers and products.

Under draft proposals for product-level disclosure by asset managers and other financial groups, the Commission has set out 32 mandatory indicators on the adverse impact of investments across environmental and social dimensions.

These range from core metrics such as emissions and energy efficiency data, to more detailed information such as amount of untreated waste water and non-recycled waste produced.

Eurosif, a pan European sustainable and responsible investment membership association advocating for a more sustainable financial system, published a response this week where they outline their criticisms and offer alternatives.

Their response document states: “Eurosif fully supports the aim of the sustainability-related disclosures in the financial services sector to bring more transparency and comparability to the market for ESG/SRI financial products.

“Transparency around principal adverse impacts is required if the EU is to meet the ambition of the Paris Agreement, the EU Climate law and Green deal and the UN Sustainable Development Goals.

“We have however some comments and suggestions around the approach proposed by the European Supervisory Authorities.

“While we agree with the overall direction, we believe that the proposal by the European Supervisory Authorities regarding the mandatory 32 indicators to measure principle adverse impacts of the investments on sustainability factors, and particularly quantitative indicators, is too ambitious in terms of timeline.

“For many indicators, data is currently either not available or not reliable enough to come with quantitative metrics.

“Furthermore, we believe that this data provides little context and too much information to investors which makes the analysis of which impacts to prioritise
and focus on more difficult.

“Finally, we have doubts as to the usefulness of the indicators across all the portfolios of a financial market participant.

“Therefore, we propose a reduced set of mandatory indicators, with the other indicators either being voluntary or becoming mandatory at a later stage when data is reliable.

“Moreover, we would suggest that the entity level disclosure focuses on the policies, approach, investment strategies and philosophy of the financial market participant and that the quantitative indicators are kept for the product level principal impact disclosure that will becoming applicable as of the 30 December 2022.

“Keeping the quantitative indicators at product level would allow a better comparability between financial products.”