The end of greenwashing

Statistics like these show why the EU's Sustainable Finance Disclosure Regulation (SFDR), which will apply from March 2021, is necessary. Under the SFDR, fund managers will need to publish information about their policies on the integration of ESG risks into their investment decisions. Not only will that combat the type of greenwashing that is suggested by this statistic, it may well even bring the 63% figure up. In a world where much more transparency on ESG will be required, it would be surprising to see any fund manager continue to ignore ESG risks, particularly given the increasingly common (and public) examples of these risks being priced into the value of assets (e.g. write-downs of oil and gas assets due to climate transition risk; the outsized adverse impact of COVID-19 on companies with poor supply chain management and health and safety measures). While the SFDR is perhaps overly ambitious in certain respects and will cause quite the headache for many fund managers, it is a necessary and timely piece of legislation. As demand for ESG investments continues to grow at speed, it is crucial that the products that are launched to meet this demand actually do what they claim. The SFDR will play a large part in keeping fund managers accountable in this regard.