New EU rules pose problems for institutions
European asset owners and money managers expect to be challenged when it comes to aligning their investment strategies with the new European Union sustainable finance rules that go into effect in 2022 as regulatory requirements appear inconsistent.
That’s because investors and fund managers are still having to source the data to determine the environmental impact of their portfolio companies so they can disclose the degree to which their holdings — and therefore their portfolios — contribute to a carbon-intense economy.
They will be required to make further new disclosures as of Jan. 1 and July 1 next year under the Sustainable Finance Disclosure Regulation, which was first effective in March this year. But those mandates come a year before their portfolio companies are required to disclose data, leaving investors in the dark over some company activities.
As of Jan. 1, managers and investors will be required to specify the degree to which their ESG investments, broadly known as Article 8 investments, and impact investments, known as Article 9 investments, are aligned with the upcoming European Taxonomy Regulation, which is expected to be approved by the European Council on Dec. 7.
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