The German fund industry association, BVI, has severely criticised the main elements of the draft guidelines on ESG and sustainability labels for investment funds proposed by ESMA...
The German fund industry association, BVI, has severely criticised the main elements of the draft guidelines on ESG and sustainability labels for investment funds proposed by the European Securities and Markets Authority (ESMA), asking the authority to defer from adopting the framework if the European Commission will consult on the review of the Sustainable Finance Disclosure Regulation (SFDR) this year.
ESMA is proposing a quantitative threshold (80%) for the use of ESG related words for funds, including a 50% threshold for the use of “sustainable” or any sustainability-related term.
It is also proposing the application of minimum safeguards to all investments for funds using such terms (exclusion criteria), and additional considerations for specific types of funds (index and impact funds).
In its response to ESMA’s draft guidelines, BVI is asking the authority to lower the 80% threshold because it limits the possibility of holding tools for liquidity management and hedging purposes in portfolios, ultimately impacting risk management.
Cash, money market instruments, index futures and other derivatives used for hedging purposes are either not aligned, or are difficult to assess in terms of ESG investment criteria in the absence of market standards, it added.
The association is also opposing the introduction of a 50% threshold for the use of the term “sustainable” or any sustainability-related term, as clarity is lacking on the criteria for sustainable investing....
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