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CFA Pushes for EU Regulatory Clarity

The EU’s ESG regulatory framework has contributed to a rise in sustainable investing, but greater clarity and improvements are still needed, the CFA Institute has said. A new survey listed greenwashing risk, lack of reliable data and clear definitions, and ESG ratings complexity as top concerns among CFA investor members, highlighting ongoing challenges with regulations including the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy Regulation. One in three survey respondents (36%) said the disclosure requirements under Articles 8 and 9 of the SFDR were too complex and made it hard for retail investors to fully understand the degree of sustainability impact for funds in which they are considering investing. Just under a third (32%) also said it was difficult to compare between ESG products as disclosures weren’t standardised and comparable across jurisdictions. “This survey of our EU members represents the views of financial professionals across the ecosystem, from large asset owners to boutique asset managers,” said Josina Kamerling, EMEA Head of Regulatory Outreach at the CFA Institute. “While a broad consensus exists that the EU regime is advancing the international agenda on sustainable finance, a similar proportion feels that EU efforts are confusing, and the lack of reliable ESG data does not make it worth integrating ESG considerations in investment decisions.” Kamerling described this as a “worrying” finding, arguing that regulators should pay attention to feedback from investment practitioners. “While members want EU regulators to continue to drive the international agenda on sustainability, they also want a focus on more tailored legislation around ESG disclosure requirements to ensure alignment with investor needs,” she added. The CFA Institute drew recommendations for the incoming EU Parliament, including providing clear and consistent ESG terminology throughout the entire legislative framework on sustainable finance, clarifying fund categorisation and disclosure requirements under the SFDR, and addressing the complexity of ESG ratings and divergent methodologies used by providers.

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