Investors seek clearer definition of what ESG means in EU

Source: iStock/designer491

Europe needs to clarify what constitutes a sustainable investment product, as current rules aren’t clear, according to a group of investors, academics and consumers convened to advise on regulations.

Whether a financial product can be called “sustainable” or “ESG” if it isn’t categorized as green under Europe’s new disclosure regulation is still up for debate, the Securities and Markets Stakeholders Group said in a report to the European Securities and Markets Authority published on Tuesday.  

The Sustainable Finance Disclosure Regulation was designed to eliminate inflated claims of investments’ potential environmental, social and governance, or ESG, benefits. But confusion has continued since its implementation in March. Billions of dollars are stake, as demand for sustainable products soars.

The stakeholders group said it’s “important” from an investor protection perspective that there’s no confusion over what constitutes a sustainable product. In its report to ESMA, the group also said the interaction between SFDR and rules governing the sale of financial instruments, known as MiFID II, “is currently not clear at all.”

The plea comes as Europe considers a new strategy for encouraging retail investing, including addressing inconsistencies across regulations.

© 2022 Bloomberg L.P.

Dear user, please be aware that we use cookies to help users navigate our website content and to help us understand how we can improve the user experience. If you have ideas for how we can improve our services, we’d love to hear from you. Click here to email us. By continuing to browse you agree to our use of cookies. Please see our Privacy & Cookie Usage Policy to learn more.