BaFin, the German financial supervisory authority, has developed a stricter practice in response to the EU taxonomy to curb greenwashing, practically forcing asset managers to disclose essential and clear information to investors regarding holdings of companies in the gas and nuclear sectors.
“With this strict practice that we now have, we prohibit greenwashing in funds´ assets before a product comes to the market at all,” said Mark Branson, BaFin’s president, during the conference “Sustainable finance – new EU standards, risk management and supervisory practice” held today in Berlin.
The practice is valid only for German products, meaning for only one part of the European market, Branson added.
The strict practice was conceived as an add-on to the EU taxonomy that includes nuclear and natural gas as environmentally sustainable economic activities, IPE understands.
Investments in gas and nuclear are under certain conditions, conform to the taxonomy, also allowed for investors in Germany.
“We have learned something in the praxis in the last months in dealing with sustainability: a very simple product labelled, green or not green, can hardly satisfy the different preferences of investors,” for some is nuclear sustainable, for others is the opposite, he said, adding that responsible investors should be able to pick the products themselves.
“A very important and from my point of view central step took place last month, since then financial advisors required in the EU to ask about sustainable preferences of clients, and this has the potential of a game changer”, Branson said.
But then the main question would be “what is a sustainable financial service”, he added.
“Is a sustainable financial service that clearly invests in green activities […] or should financial services fund the transition to a green economy? We are confronted with these questions almost daily as a financial supervisory authority,” Branson continued.
Danger of mixing politics and science
The discussion about energy sources necessary for the transition to a low carbon emissions economy has become complex with the start of the war in Ukraine and the current energy crisis.
Currently the political and scientific discourses are mixing, and this impacts on the complexity of the issues, Branson said.
As a supervisory financial authority, BaFIn should work to improve transparency for investors to understand if a product is sustainable. BaFin therefore supports a “universal and mandatory” implementation of transparency at the EU level, so that responsible investors can make their own decisions, he said.
BaFin has given approval to 167 sustainable Publikumsfonds since August last year, and the number is increasing.