Greenwashing concerns and data issues are preventing the market from reaching its full potential, says a CFA Institute survey
A survey of EU-based CFA Institute members has shown that while the EU’s regulatory efforts are boosting sustainable investment across the board, major challenges remain: namely, concerns over greenwashing and unreliable environmental, social and governance data.
The survey focused on the Sustainable Finance Disclosure Regulation and the EU Taxonomy Regulation, highlighting the difficulties that investors face regarding ESG disclosures and data reliability.
Despite the plethora of ESG data solutions on the market, 65 per cent of respondents said lack of reliable data was an issue, while 45 per cent said data collection was too expensive and they struggle to find the right staff for the job.
In a statement, Josina Kamerling, head of EMEA regulatory outreach at the CFA Institute, said while there was a broad consensus that the EU regulatory regime is helping to advance sustainable finance, “a similar proportion feel that EU efforts are confusing, and the lack of reliable ESG data does not make it worth integrating ESG considerations in investment decisions”.
“This is a worrying finding, and regulators ought to pay attention to feedback from investment practitioners,” Kamerling added.
The survey also said retail investors found the volume and intricacies of sustainability data confusing, which has been compounded by the differing disclosure requirements under articles 8 and 9 of the SFDR.
More than a third of respondents believed the taxonomy has been “overengineered”, resulting in unnecessary complexity and confusion.
The CFA Institute recommends that EU regulators continue to drive the international agenda on sustainable investing, but says the EU should better tailor taxonomies and disclosure rules to financial markets’ needs.
The institute requests clear and consistent ESG terminology across different rules and regulations, and says rulemakers should clarify the fund categories under SFDR.
Regulators are already addressing the last point: an ongoing review of SFDR is expected to result in a new regime that looks more like the UK’s Sustainability Disclosure Requirements.
You can read the full report here.