In advance of the event, Delano spoke with Katherine Scott, sustainability legal counsel, Macquarie Asset Management. She speaks on the “From acronyms to ESG compliance or greenwashing?” panel, Tuesday 21 March at 4:40pm.
Aaron Grunwald: What do you want the audience to get most from the “From acronyms to ESG compliance or greenwashing?” session?
Katherine Scott: Asset managers are all grappling with similar issues in responding to the EU’s ambitious sustainable finance agenda. It’s critical that the industry participates in market consultations so that we can help shape regulations that are fit for purpose and take account of the nuances of ESG investing across all asset classes.
We need clear rules to enable transparent, comparable disclosures which can help to build trust in the market and mobilise capital flows in support of achieving the objectives of the Paris Agreement and the Sustainable Development Goals.
From your point of view, what are the most challenging ESG compliance or greenwashing issues that fund firms face this year?
Updated guidance and amendments to the SFDR have had a significant impact on asset managers and not addressed uncertainty surrounding the interpretation of key concepts. In my view, this regulatory uncertainty risks impacting investment into sustainable economic activities. In addition, changes have been introduced without sufficient consideration given to the time and investment required to implement them.
Of key concern to asset managers this year will be updated guidance on how to interpret a “sustainable investment” and the proposed fund classification guidelines.
Why has the market been reluctant to disclose taxonomy alignment?
It can be difficult to get the data required to make assessments. The work is often resource intensive and expensive – particularly when outsourced to third party experts. Care needs to be taken when relying on third party ESG data solutions to ensure the methodologies used align with regulatory requirements.
International investors are also encountering challenges when assessing non-EU investments against EU legislation and standards which don’t apply to underlying investee companies.
We expect these issues will ease over time as the market responds with new solutions but until this happens, some managers may be reluctant to disclose alignment.
Aside from your own talk at the Alfi event, which session are you most looking forward to hearing, and why?
“The role of the fund board in implementing an ESG strategy” [editor’s note: Tuesday 21 March at 11:40 am]. The antidote to “greenwashing” is good corporate governance and I’m keen to hear the panel’s views on best practice and how to effectively oversee ESG and impact investing.
We think this is an important aspect of any ESG strategy and have been taking steps to improve transparency through better investor reporting, enhancing ESG training, uplifting management information to boards and senior management, introducing a dedicated sustainability oversight committee, and increasing expert resources, amongst other initiatives.
Updated Monday 20 March to correct panel title