By Michael Maldener, Managing Director Nordea Investments Funds S.A.
The Sustainable Finance Disclosure Regulation and the need to look beyond the rim of the tea cup
The Sustainable Finance Disclosure Regulation (short: SFDR) is live now and we have seen great efforts on the side of the asset management industry to meet the new requirements, even though the SFDR is still principle based and the Regulatory Technical Standards (RTS) will follow only in about a year’s time.
Although many firms claim that their work in meeting the new requirements has been a success so far, they must be asking themselves whether they have made it to the finish line now, or whether they are only at the starting line for a marathon that is still ahead of us.
Personally, I believe it is the latter. The greater part of the path still lies ahead of us and goes way beyond the currently discussed disclosure regulation. The SFDR, the taxonomy and other pieces of regulation that are still to come will shape the future.
All of these initiatives are right, necessary and urgent in order to transform our industry as well as our society as a whole. The financial industry has to assume its responsibility towards society.
Thus, the issue at hand is much bigger than simply complying with a new set of regulations.
The new regulations are introducing new terminology and complexity. They will change in a profound way not only the products, but also the way in which these are distributed. Consider, for example, the integration of customers’ sustainability preferences in each and every advisory session. With the new regulations, customers gain new rights. Going forward, they are to be treated and advised no longer only along the lines of traditional financial metrics such as risk and return. Instead, sustainability and the idea of investing in and for a common future are taking centre stage. Players in the financial industry will be required to reconsider their approach, to educate themselves and their clients and, to some extent, even transform the existing culture to make sustainability matter and succeed.
The sum of all different regulatory initiatives targeting sustainability is highly complex. While the regulatory wave sweeps over the industry, it is more important than ever to keep up to date with developments. Furthermore, asset managers must actively engage with the industry, their clients and additional stakeholders to ensure that the asset management industry can satisfy the new demands and that it does so in a tangible and credible way by showing concrete proof points and results to investors.
Therefore, let us look beyond the rim of our traditional tea cup and use the newly introduced regulations as an opportunity to foster necessary long-term transformations – for the benefit of all.
| All opinions expressed are those of the author. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.