Efama said new guidelines on naming investment funds could limit the scope of investments in green bond funds, especially corporate green bonds, which are critical to the energy transition.
The European Asset Management Association also said the guidelines could undermine the future success of the EU Green Bond Standard (GBS) if large investors such as funds are prevented from investing in certain EU GBS-compliant bonds. said.
In a statement today, it said that for use-of-proceeds products such as green bonds, “current interpretations and clarifications in sustainable finance regulation” focus on the projects being financed rather than the wider activities of the issuing company. said.
However, Efama said the fund naming guidelines drafted by ESMA exclude companies based on the EU Paris Agreement Benchmark (PAB) criteria, regardless of their debt-financed projects.
According to Efama, a bond fund that invests in green bonds will either remove sustainability or environmental terms from its name, or retain its name but issuers that generate part of their income from activities outside the scope of the PAB There is a possibility that it may have to be separated from the
Efama said this restriction could slow down the energy transition as utility companies, which play a key role in building the infrastructure needed for a more sustainable economy, are the largest issuers of green bonds. Ta.
ESMA’s final guidelines mean that all funds that use words such as “environment”, “impact” and “sustainability” will be subject to the screening criteria set out in the PAB Regulation, which includes bans on the most polluting electricity and oil. It is necessary to exclude assets that violate the rules. And the gas company.
However, funds labeled ‘transition’ can use the criteria of the Climate Transition Benchmark (CTB), a simplified version of the PAB, without the energy exclusion.
Enive Arakelijian, Regulatory Policy Advisor at Efama, said: “A common interpretation is that sustainable finance regulations should focus on the project being financed, rather than the broader activities of the issuing company.
“To ensure consistency across regulations, this principle must also be applied to fund naming guidelines. Our hope is that ESMA will understand this logic with respect to green bonds. If we want to remain a world leader in sustainable finance, it will be critical that we consistently understand and apply key concepts.”
Earlier this year, Morningstar found that 30 funds disclosing under Articles 8 and 9 of the EU’s Sustainable Finance Disclosure Regulation (SFDR) have removed ESG-related terms from their fund names since the beginning of the year. It was reported.
Asked to respond to Efama’s criticism, an ESMA spokesperson said the watchdog was “considering certain issues related to the practical application of the guidelines regarding fund names using ESG and sustainability-related terminology. This requires further guidance.
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