EU ‘urgently’ needs common ESG rules, says French watchdog
AMF’s Robert Ophèle voices concern about member states undercutting one another on standards
France’s top financial regulator has urged Europe to move faster on setting common standards for environmental, social and governance investing to prevent widespread “greenwashing”.
Robert Ophèle, chairman of the Autorité des Marchés Financiers, said the explosion in interest in ESG and the absence of EU-wide rules governing what constitutes a sustainable fund left Europe vulnerable to diverging practices that could undermine responsible investing.
Mr Ophèle warned of the possibility of EU countries undercutting one another on ESG unless action was taken, as asset managers become “increasingly ambitious and even aggressive” in bringing sustainable funds to market.
“National regulators cannot accept that financial products are sold in their country which despite [being labelled as ESG] seem profoundly different [from other ESG funds],” he said in a speech delivered in Paris.
He said regulators needed to be subject to “a common doctrine on authorising funds whose investment policy is based on non-financial criteria”. Mr Ophèle said minimum standards were “crucial to avoid the concept of ESG being watered down [and] to avoid potentially disastrous greenwashing”.
France has gone further than many other EU member states on ESG. Its 2016 energy transition law requires asset owners to report their management of climate-related risks and the integration of ESG into investment policies.
Mr Ophèle welcomed the work the EU is doing on sustainable finance, which is aimed at turning the bloc into a global leader for ESG. But he indicated that Brussels, which is not expected to finalise the new rules until at least next year, needed to speed up its efforts. “We need to act urgently.”
One of the EU’s proposals is a classification system defining environmentally sustainable investments. However, this “taxonomy” only partially addresses France’s concerns, as it will not define investments that meet social and governance criteria.
Sven Giegold, a Green MEP whose push for social and governance factors to be included in the taxonomy did not win a majority in the European Parliament, said the lack of standards for all sustainability criteria would hinder asset managers’ efforts to obtain relevant data from investee companies. “Without this, investors cannot compare anything.”
Mr Giegold added that until social and governance investments were defined at an EU level, the risk of greenwashing remained high. “More and more financial companies want to do sustainable investment. But if there is too much dirt in the market people will be put off. The credibility of the market is at stake.”