(June 4): A European Commission proposal to dramatically cut asset managers’ ESG reporting requirements is facing opposition from the bloc’s largest sustainable investor organisations.
The commission, which last month recommended that money managers be exempt from a requirement to report environmental, social and governance (ESG) data on the assets they hold on behalf of clients, left the industry reassured that its demands had been heard.
But in a June 2 letter to Maria Luis Albuquerque, the EU’s financial services commissioner, the European Sustainable Investment Forum and the European Federation of Financial Analysts Societies called for the proposal to be reversed.
“Actual portfolio holdings provide the most objective evidence of how policies translate into practice — rather than merely described in theory,” the organisations said in the letter, which was co-signed by non-profits including Frank Bold and WWF.
In a separate response to the commission’s proposal, the Institutional Investors Group on Climate Change (IIGCC), whose members manage a combined £50 trillion (US$67 trillion) in assets, asked the commission to spell out “the scope of the exemptions,” citing concerns the proposal would allow them to leave out critical information.
Asset managers’ investments on behalf of clients “are often firms’ most material exposures,” IIGCC said, adding that the current recommendation would deviate from international reporting standards.
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The commission’s proposal has yet to be approved by EU member states and lawmakers. A spokesperson for the commission said it will review the feedback.
The disclosure requirements, formally known as the European Sustainability Reporting Standards, or ESRS, are detailed instructions for how companies should meet the bloc’s Corporate Sustainability Reporting Directive.
The commission, which is the EU’s executive arm, has proposed that any firm managing investments on behalf of clients and “without retaining risks or rewards of ownership” shouldn’t have to provide ESG data on those investments. A public consultation on the proposal closed on June 3.
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The question of whether financial institutions should have to report ESG metrics for client assets has long been contested.
In its response to the commission’s consultation, Groupe Credit Agricole said exempting asset managers “avoids confusion” as well as duplications, since “these investments are client assets, managed through funds and mandates” and “already subject” to other transparency requirements “dedicated to the asset management sector”.
Also supporting the exemption are AFG, the French asset management trade group, as well as the Dutch Federation of Pension Funds, and the German Investment Funds Association.
The commission’s proposal “acknowledges the fundamental difference” between banks’ and insurers’ business models that “take the risk of their services on their own books and the agency business operated by asset managers,” the German trade group said in its response.
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