Investment managers have a key role to play in helping to encourage investing institutions in the right direction.
Previously a subject left to industry good practice and investor demands, socially responsible investment (SRI) is beginning to move up the regulatory agenda. We predicted in the Evolving Investment Management Regulation 2016 report that as a result of the new legally-binding treaty on climate action agreed in Paris nearly a year ago,
The new treaty contains emission reduction commitments from 187 countries starting in 2020. The countries have made commitments to reduce greenhouse gas emissions and to manage the impacts of climate change. French law has already been modified to require more specific disclosure in the management report of French entities, including investment funds, on the resources put in place to contribute to environmental improvements. The investment manager must consider the assets in which it invests its clients and their impact on the environment. The new rules are applicable from the end of this year.
Discussions are now taking place at European level. ESMA is considering how the provision in the new Key Information Document relating to an investment product’s environmental objective might ensure proper transparency. And MEPs across the political spectrum are seeking the industry’s views about what more needs to be done at
Initial thoughts emerging include the need for clarity on what is and what is not SRI,
Meanwhile, investing institutions are increasingly incorporating green investments into their portfolios. A long-term investing horizon is essential for retirement savings, for example, and is also a prerequisite for sustainable investment. But there also need to be more SRI investment opportunities. These might be new investments or existing investments that are brought into compliance with SRI requirements.
Investment managers have a key role to play in helping to encourage investing institutions in the right direction via their communications and the investment strategies they offer. This may require firms to adjust their investment and operational processes. KPMG, in association with the United Nations Global Compact publishes a Sustainable Development Goals Industry Matrix, which provides examples and relevant information on Sustainable Stock Exchanges.
The debate is not only
Hitherto, firms have been encouraged by investors, by regulators or by governments to adhere to