Investors have welcomed the European Commission’s proposals for a unified framework for ESG investments, but have warned of challenges to achieving a consensus.
At an annual gathering in Vienna of institutional investors from Germany, Austria and Switzerland, delegates discussed the commission’s sustainable finance proposals, published last month.
Martin Sardelic, chairman of the board at Austria’s Valida Holding, said he was “surprised at the speed” with which the commission had finalised the proposals.
“The paper contains a lot of sensible ideas, especially the common definition of standards, but the interesting question will be to see whether nuclear energy will be excluded or not as France is playing a major part,” he added.
Several delegates agreed this was a problem, as the definition of sustainable investment varied widely between EU member states.
In Austria, for example, nuclear energy is an absolute no-go for ESG investors, while French investors consider it one of the most environmentally-friendly ways of producing power.
Robert Haßler, co-founder of the Oekom Research rating agency, highlighted that “in the high-level preliminary group preparing the proposals, no Austrians or Germans were represented”. He argued that this advisory group “in a way mirrored the correlation of power of European institutional investors in the ESG market”, with France, UK, the Netherlands and Nordic countries at the forefront.
Valida’s Sardelic welcomed proposals for more transparency for ESG investments, and the possible introduction of benchmarks. However, he warned the finance industry should observe carefully what would be required.
“For me it is surprising that the financial industry is singled out in the paper and is asked to bear a lot of responsibility,” Sardelic said, adding that there were “contributions the financial industry can make” but it should not be asked to do so on its own.
Taxes on aviation fuel and long-distance transport should also be discussed EU-wide in a sustainability context, he said.
Franz Partsch, director of the treasury department at the Austrian national bank ÖNB, said it was important to get all stakeholders in the financial industry on board, including rating agencies, index providers, investors and managers.
However, he also warned of too much new regulation, saying: “It would be sensible to create a wide European framework for reporting on ESG activities within which several market practices can evolve.”
He also said it would make sense not to apply “a too euro-centric approach”, as ESG was a global issue.
Sardelic argued that the EU’s proposals strongly focused on climate change and environmental protection, but sustainability “is about a lot more than the environment”.
ESG investors moving away from exclusion approaches
Meanwhile, the German sustainable investment association Forum Nachhaltige Geldanlagen (FNG) has issued its annual ESG report covering Germany, Switzerland and Austria.
For this year’s survey of 49 investors in the region, the definition of ESG investments was narrowed down leading to a slight drop in the number of assets invested under these criteria. The reported ESG assets fell from €242bn to just under €200bn.
However, the researchers confirmed a general growth in ESG investments among institutional and retail clients.
In all three countries the exclusion approach was losing its leading position among the ESG strategies used by investors, the report found.