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EC Says Managers Must Define Sustainable Investments

The European Commission has declined to provide a definition for what constitutes a sustainable investment, in its response to questions posed last year by the three European Supervisory Authorities relating to regulatory oversight of the Sustainable Finance Disclosure Regulation (SFDR). “The definition of sustainable investment set out in Article 2, point (17), SFDR does not prescribe any specific approach to determine the contribution of an investment to environmental or social objectives,” it said. The Commission said it was up to fund managers and other service providers to explain their assessment of sustainable investments, including their contribution to environmental or social objectives. “The SFDR does not set out minimum requirements that qualify concepts such as contribution, do no significant harm, or good governance, i.e. the key parameters of a ‘sustainable investment’. Financial market participants must carry out their own assessment for each investment and disclose their underlying assumptions,” it said. The response follows growing calls for greater guidance from asset managers in response to toughening requirements from national regulators in Europe, regarding the proportion of sustainable funds in SDFR Article 8 and 9 funds.


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