Supervisors flag ‘inadequate’ sustainability staffing at some asset managers

The European Securities and Markets Authority (ESMA) has said some asset managers don’t have enough suitable staff to address sustainability risks in line with EU requirements.

The regional supervisor flagged its findings in a report published on Monday that takes stock of current practices around sustainability disclosure and integration in the fund management industry.

Based on feedback from the national competent authorities (NCAs) responsible for enforcing the EU’s rules within each Member State, ESMA found the number of Full Time Equivalent (FTEs) employees responsible for integrating sustainability risks ranged from 0.5 to 16.

“Smaller managers tend to allocate a greater proportion of their workforce to ESG matters,” noted ESMA.

“For example, in one jurisdiction, small firms allocate around 10% of their FTEs to ESG matters, while larger firms allocate around 1.5%.”

The NCAs identified inadequate staffing levels at some asset managers covered by provisions under the UCITS Directive, which require the integration of sustainability risks.

While supervisors were “overall satisfied” with the experience and knowledge levels of the employees, the report pointed out examples of bad practice.

It pointed to one unnamed investment house where the senior manager in charge of ESG and the integration of sustainability risks had only one year of experience, which ESMA said criticised for being acquired via “trainings and seminars”.

“Senior management has an inadequate level of resources and expertise for the effective integration of sustainability risks,” it continued.

“And senior managers do not have a proven track record linked to sustainability, complemented by adequate training.”

The watchdog stressed that it considered a “workforce with adequate skills, knowledge and expertise” a crucial part of effectively integrating sustainability risks into strategy in accordance with EU rules.

Such skills and knowledge “should be acquired and retained by managers”, it continued, and they must demonstrate that staff are trained “at a regular frequency” to ensure they maintain and improve their expertise.

The report also explores current best practice from managers on the EU’s Sustainable Finance Disclosures Regulation (SFDR).

Last month campaign group ShareAction said Europe’s biggest asset managers were failing to disclose enough useful information about their engagement activities under the SFDR.

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