Leading the shift to responsible investing

The Paris Agreement was adopted, aiming to limit global warming to a maximum of 2°C above pre-industrial levels and ideally no more than 1.5°C. Since 2015 a wide range of regulations have been introduced to encourage change across sectors and geographies, for the benefit of investors. 

The EU made sustainable development a top priority in its economic and financial policy. As a result, it has created key regulations in response to ESG and climate change topics. The EU Action Plan on Sustainable Finance was announced in 2018. The EU Action Plan comprises 10 actions that are aimed at reorienting capital to a more sustainable economy, normalising sustainability factors in risk management and fostering transparency and long-termism.  

As part of the Benchmark Regulation (BMR), the EU introduced the Low Carbon Benchmark regulation in December 2019. This created two new categories of benchmark: the Climate Transition Benchmark (CTB) and the Paris-aligned Benchmarks (PAB). CTBs and PABs provide a set of standardised criteria for benchmarks designed to support the transition to net zero.

The implementation of the Sustainable Finance Disclosure Regulation (SFDR) level 1 which enables investors to clearly identify financial products with ESG elements, making it easier to compare and contrast these funds.

Taxonomy provides a common language for sustainable economic activities which will be the foundation of other ESG regulation. The Taxonomy gives us a definition of environmentally-sustainable economic activity which targets the mitigation of climate change, the adaptation of climate change, the sustainable use of water, the transition to a circular economy, the prevention of pollution and the protection and restoration of biodiversity. Large and listed companies will need to disclose the extent to which their activities are eligible and aligned to the Taxonomy and will need to publish data in support of this.  Asset managers, like Amundi ETF, will need to publish qualitative and quantitative ESG information and report on the % of their portfolios aligned with the Taxonomy.

The ESMA Guidelines on fund names that use ESG or sustainability-related terms are introduced to protect investors from unsubstantiated or exaggerated sustainability claims and to give asset managers clear, measurable criteria for using ESG- or sustainability-related language in fund names. The Guidelines establish strict naming rules for European UCITS and AIFs that incorporate ESG or sustainable investment strategies.