Ahead of the European Fund and Asset Management Association’s on 23-24 November, Delano caught up with Shaneera Rasqué from Luxembourg’s Financial Sector Supervisory Commission to hear about challenges and regulation related to sustainable finance. Rasqué will participate in a panel discussion on navigating the ESG investing regulatory framework.
For you, what are the most significant challenges in terms of sustainable finance regulation and sustainable investment? And how can these be overcome? Is regulation making it easier or more difficult to invest sustainably? How does regulation play a role in building trust in green investments?
Shaneera Rasqué: Like any new piece of regulation, the sustainable finance package is not without its challenges.
However, before addressing those, it is important to also acknowledge the positive features of the sustainable finance regime, which are, amongst others: (i) key recognition of the impacts of climate change and hence that sustainability considerations cannot be ignored anymore, (ii) the sustainable finance regulation, by helping to enhance transparency on the sustainability ambitions of products, has contributed to build the bridge between entities offering sustainability-related products and end investors, thus further allowing to finance the transition to a climate neutral economy.
Also, important to remind stakeholders that there were no blueprints at the time of the implementation of the sustainable framework, which rendered the task even more difficult, also in consideration of the complexity of the issue at hand.
Having said that, there are adjustments to the framework that need to be made for it to be fully effective. If I would need to select immediate challenges to the current regime, those would be:
(i) addressing the complexity of the disclosure regime under the Sustainable Finance Disclosure Regulation (SFDR) and especially for retail investors. Further streamlining and standardising those disclosure elements would help to enhance comparability and will benefit end investors.
(ii) tackling the lack of a clear and uniform definition of what constitutes a sustainable investment, which is a central pillar of the SFDR but does not benefit from clear specifications, such that each entity can currently have its own definition of sustainable investment.
(iii) further specifications for financial products disclosing under article 8 and 9 so as to ensure comparability of the products. This particularly applies to SFDR article 8, which benefits from far less specifications in the regulation compared to SFDR article 9 products, which means that the spectrum of financial products disclosing under SFDR article 8 is currently broad, and it can become difficult for investors to navigate through--and compare--those products.
The challenges mentioned above are commonly known to stakeholders and will hopefully be addressed in the potential review of SFDR on which the European Commission is currently consulting.
In your opinion, as ESG coordinator for investment funds at the CSSF, how can the CSSF contribute to boost investments in sustainable investments?
Obviously, the significant position Luxembourg holds in the financial landscape makes it clear that we have a key role and card to play on the sustainable agenda. Luxembourg is the biggest fund centre in Europe and the second-largest one in the world. We are also a leader in cross-border fund distribution.
The redistribution of the capital held in those financial vehicles to sustainable investments or investments having sustainable characteristics represents an opportunity for Luxembourg to distinctively contribute to the private financing of the EU green deal and to ESG more generally.
At the CSSF, we will continue to conduct our mission of ensuring transparency and financial stability as well as investor protection so that investors can continue to confidently invest in investments with different levels of sustainability ambitions.
Adding to this, financial literacy is very dear to the heart of the CSSF. The CSSF will continue in its role of financial education to make people aware of sustainable finance and further embrace the change.
The panel you’re participating in is called “Seeing the forest for the trees: navigating the ESG investing regulatory framework.” Without any spoilers, could you give us a sneak peek of the topics that will be discussed?
It will be all about lessons learnt so far in relation to the application of SFDR and taxonomy regulation and, most importantly, about looking ahead, thus further looking at how to improve and further build the pathway towards a sustainable future.
Besides your own panel at the Efama conference, which session are you most looking forward to hearing, and why?
Difficult to say as I am really looking forward to all the panels. But if I really have to choose, I would say “Charting the horizon: how the next Commission can forge stronger capital markets,” because it will provide interesting insights and thoughts on the next commission’s priorities for financial services and the role asset managers can play in this regard.
Shaneera Rasqué will participate in the at the European Fund and Asset Management Association’s Investment Management Forum on 24 November, 9:35am.