8. 8. 2018
8. 8.
2018
Rosy prospects for green investments
In May 2018, the European Commission (EC) presented a package of legislative proposals aiming to promote sustainable finance. The package includes a regulation on disclosures concerning the sustainability of investments, and a regulation on the establishment of a framework to facilitate sustainable investment. If passed, what practical effect will the new regulations have on companies issuing and distributing investment instruments such as shares or bonds?
The proposals aim to redirect at least 40% of funds invested to sustainable investments, including:
- investment in economic activities that contribute to environmental preservation, such as activities reducing the speed of global warming, or activities protecting individual ecosystems;
- investments in economic activities that contribute to achieving social goals, in particular activities promoting social cohesion or investments in human capital; or
- investments in companies that follow the good practices of corporate governance.
To achieve this, the EC prepared a set of rules to apply to all investment instruments and investment services. These will mostly affect investment advisory and portfolio management: providers of such services will be obliged to include sustainability issues in the questionnaires they use to determine their clients’ investment concepts. The same should also apply to distributors of insurance-based investment products, typically unit-linked life assurance.
Selected providers of services in financial market, such as investment and pension fund managers, will also have to prepare and publish the internal sustainability policies that they follow when providing the services.
The regulation also imposes duties on those creating individual products: for each investment instrument, a sustainability analysis will have to be prepared, reviewed and updated on a regular basis. For financial products, the analysis will also have to include information on the number of reduced emissions, serving as a kind of eco-label already known from electronics or real estate.
The new rules should apply from 2022.
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