EU Sustainable Finance Action suffers major blow, but it is not too late to fight back!
This is outrageous: 18 out of the 32 environmental and social impacts could be dropped from the mandatory to the optional reporting category in European Union flagship financial sustainability regulation.
The EU’s investment industry and their trade bodies argued like 5 3-years-olds and still succeeded incapacitating the Sustainable Finance Disclosure Regulation (SFDR), a key component of the EU Sustainable Finance Action Plan and the EU Green Deal. The corresponding European Banking Authority, European Securities and Markets Authority (ESMA), European Insurance and Occupational Pensions Authority draft Regulatory Technical Standards (RTS) on ESG disclosures has just been published.
The lobbyist’s infuriating logic can be summed up as: (Step 1) we do not have sufficient data on / knowledge of the impacts of our activities on the environment and society so we cannot report on them; (Step 2) no doubt it could be useful to have such data, but sadly we do not have it. However, we may still claim that our investments either promote or have the objective of sustainability (go back to Step 1).
Some hair-raising quotes:
1. “providing 32 mandatory indicators may inhibit end-investors’ ability to make informed decisions as they might feel overwhelmed with data and disengage from the ESG consequences of their investments” (p 132)
2. “The longer the list of mandatory indicators, the less scope there is for adding optional indicators, without increasing the data overload” (p. 181)
3. “A majority of respondents argued that the list of mandatory indicators should be reduced because it is too burdensome or has limited informative value.” (p133)
Finally, about the expected (annual) costs of the proposed, now watered-down ESG / SFRD reporting:
· 0.0001-0.0003 % of #AuM (Assets under Management);
· “The Commission asked in its public consultation about the additional costs of integrating ESG considerations, to which respondents with one exception chose the lowest range of costs” (page 105 with reference to the EC’s Impact Assessment).
The RTS document actually has some similar concerns as raised recently in the United Nations-convened Net-Zero Asset Owner Alliance (NZAOA) 2025 Target Setting Protocol (“The limited availability of reliable data is a key issue which provides for asymmetrical information and challenges for investment decision making.; page 22 ” (Corresponding post).
However, there is a huge difference: the NZAOA is committed to action - decarbonsation - DESPITE the limitations; those lobbying within the EU are using the same arguments AGAINST decisive action to be triggered by mandatory regulations.
Or are we up for a surprise? Is there perhaps an overlap between the NZAOA 33 members and those lobbying for the weakening of the SFRD?...
Perhaps, a pattern of the left-hand loudly promoting #sustainability (and initiatives tagged as such) and the right-hand lobbying against anything effective/decisive regulatory is emerging?
Or is it enough to read the investment/finance industry submissions , out of the 570, sent for the IFRS Foundation Consultation paper on Sustainability Reporting and one would establish a clear picture on who supports a single-materiality ( = report only those external aspects that have a financially material impact ON the reporting entities), narrowly scoped reporting regime that is inherently incapable of capturing our dire sustainability challenges? I suspect that the proposed content for IFRS for an industry-led voluntary scheme and the lobbyists’ content preferences for the mandatory EU regulations are more or less the same.
Colleagues at InfluenceMap, ShareAction, Preventable Surprises, Follow This, R3.0, Reclaim Finance; Client Earth, E3G, Ember, CAN-Europe, WWF, Friends of the Earth : would you mind sharing your insights and thoughts on these lobbying aspects?
I am also asking the Net-Zero Asset Owner Alliance members below for their views & actions re. the SFRD & IFRS consultations.
My conclusion: Welcome to the Anthropocene; a world full of us, humans; if we continue to turn a blind eye on everything that matters, we will inevitably mess up our Planet and People(s).
Adam Smith, with the “invisible hand” that never picks up the bill, & Milton Friedman with his “shareholder primacy” delusion are dead. If we continue like this, we will be too.
Let's fight back and ensure that a meaningful Sustainable Finance Disclosure Regulation emerges within the EU.
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I would much appreciate if you would share your own / your organisations’ views & actions regarding the EU’s Sustainable Finance Disclosure Regulation (SFDR) and the IFRS Consultation paper on Sustainability Reporting. Given the watering-down of the SFRD you should be inclined to show your cards to save your face:
Udo Riese (Allianz), Claudia A. Bolli (Swiss Re), Sylvain Vanston (AXA), Thomas Liesch (Allianz), Peter Sandahl (Nordea), Marcus Bruns (Storebrand), Jean-Francois Coppenolle (Aviva), Helena Charrier, CIIA (CDC), Thiviya Rajendran (Aviva), Peter L??w (Alecta), Aaron Pinnock, CFA (COE), Lise Moret (AXA), Sadaf Stutterheim (Zurich Insurance Company Ltd), @Ben Carr (Aviva), Michel Léveillée (Caisse de dép?t et placement du Québec (CDPQ)), Gallus Steiger (Swiss Re), Johanna K?b (Zurich), Ditte Seidler Hansen (PD), Bertrand Millot (CDPQ), Vincent DAMAS (CNP Assurances), pauline lejay (ERAFP (The french public service additional pension scheme)), Elisa Vergine (Generali), Emilie Westholm (Folksam), Johannes J?gi (Folksam), Jan K?raa Rasmussen (PD), Divya Mankikar (CalPERS), Anne Faivre (CDC), Florent Rebatel (CDC), Anna Viefhues (AMF), Eric Jean Decker (AXA), Zelda Bentham (Aviva), Pascal Coret (CDC), Patrick Peura (Allianz) Sona Stadtelmeyer-Petru (Allianz), Anil Gurturk (KENFO - Fonds zur Finanzierung der kerntechnischen Entsorgung), Adam Matthews (COE), Stephen Barrie (COE), Jens Norell (AMF), Russ B. (Aviva), Yun WAI-SONG (SCOR), Justin Travlos (AXA), Thibaud Escalon (AXA), Thomas Rouland (AXA), James Corah (CCLA Investment Management), Allison van Lint (Cbus Super Fund), Nicole Bradford (CBUS), James Spencer (CBUS), Rosalind McKay (CBUS), Laureen Tessier Haygarth (CDC), Laurent Deborde (CDC), Magued ABOU ALI (CNP), Charles-David Tremblay, B.A.A., M.A.P. (CDPQ), Charly Bastard (CDPQ), Francois Humbert (Generali), Francesco Sola (Generali), Jacopo Cardinali (Generali), Dr. Johannes Blankenheim (Kenfo), Troels B?rrild (MP Pension Funds Baltic), Martina Englmann (Munich Re (Group) Re), Alfred Wasserle (Munich Re), Silke Jolowicz (Munich Re), Pascal Zbinden (Swiss Re), Jake Barnett (Wespath), Rashed Khan (Wespath Benefits and Investments), Fred Huang (Wespath Benefits and Investments), Candice Dial (Rockefeller Capital Management), Adam Phillips (UNJSPF),Claudia Limardo Richtzenhain (Zurich Insurance Company Ltd), Danielle Brassel (Zurich), John Scott (Zurich), Sue Reid (Mission2020),David Knewitz (WWF), Hannes Peinl (WWF), Jan Vandermosten (WWF), matthias kopp (WWF), Edward Baker (UNPRI), Sagarika Chatterjee (UNPRI), Remco Fischer (UNEP FI), Elke Pfeiffer (UNPRI), and Jesica Andrews (UNEP FI).