The EU has agreed to delay implementing a key requirement of new rules designed to make it easier to judge how ‘green’ asset managers are, bowing to pressure from Europe’s €17tn investment industry.
The European Commission last week told fund groups that they would have more time to provide detailed information on the environmental, social and governance risks in their portfolios given the complexity of the data involved, according to people familiar with the matter.
The new set of sustainable investing rules from Brussels is intended to clamp down on “greenwashing” and make ESG funds easier to compare by forcing asset managers to disclose more on their investments. It is one of the central parts of the EU’s push to fund the green transition by channelling more money into sustainable projects.
In a letter to two asset management industry trade bodies, seen by the Financial Times, the commission said that while the new legislative framework would still come into force next March as planned, asset managers would have more time to comply with new disclosure requirements.
The decision to delay the need to comply is the first sign that Brussels is having to compromise on its ambitious targets given the challenges of establishing — and enforcing — a new set of ESG metrics from scratch.
The investment industry has argued the March 2021 deadline was unrealistic given the mammoth reporting task involved. However, the decision by Brussels to give the industry more time — possibly until 2022 — could also stoke concerns that asset managers are simply being allowed to drag their feet.
The commission’s willingness to grant a delay follows its earlier decision to extend the public consultation on the draft rules because of disruption caused by the coronavirus pandemic. This, in turn, pushed back the EU’s publication of its final regulations, leaving little time for fund groups to comply.
Thomas Richter, chief executive of BVI, one of the asset management trade bodies that lobbied for a delay, said that the original implementation deadline would have only left five weeks to comply.
This would have made the task of updating fund disclosures “practically impossible”, jeopardising the ability of asset managers to sell sustainable products from March 2021, he said.
The EU’s financial supervisors, which co-ordinate regulators across the bloc, echoed the calls for a delay to the detailed disclosure rules earlier this year.
In the letter to the trade bodies, John Berrigan, an official in the commission’s financial services unit, described the postponement of the commission’s consultation period as “unfortunate” but said that it “did not subtract from the central importance the regulation has in making the European economy future-proof”.
The commission did not immediately respond to a request for comment.
Victor van Hoorn, executive director at sustainable finance association Eurosif, said the fact that the commission had not wavered from its original start date for the overarching legislation suggested it expected asset managers to “continue relentlessly with the implementation process”.