French and Dutch financial market authorities want EU regulation of greenwash

Fostering the green transition in Europe will require significant investment over the coming years; the European Green Deal estimates that €260 billion needs to be mobilised annually by 2030.

The Autorité des marchés financiers (AMF) and its Dutch counterpart, the Autoriteit Financiële Markten (AFM), propose a European regulatory framework for providers of sustainability-related services, which could become one of the key measures of the European Commission’s renewed sustainable finance strategy. The proposed framework is aimed at preventing misallocation of investments, greenwashing, and ensuring investor protection. It includes requirements on transparency on methodologies, management of conflicts of interest, internal control processes, and enhanced dialogue with companies subject to sustainability ratings.

Fostering the green transition in Europe will require significant investment over the coming years; the European Green Deal estimates that €260 billion needs to be mobilised annually by 2030. The influence of Environmental, Social and Governance (ESG) factors on the investment decisions of retail investors and asset managers is substantial and likely to grow. At the same time, increasing regulation on sustainable finance fuels the demand for ESG data by investors.

ESG data and service providers play a an important role in the investment allocation process. To meet investors’ growing needs for sustainability-related data and analysis, the quality and reliability of these data and related services are vital. While their influence is expected to grow considerably, providers of sustainability-related services remain largely unregulated.

A regulatory framework would make it possible to avert certain risks for investors, such as misallocation of investments or greenwashing. Given the diversity of methodologies used for sustainability ratings, greater transparency on methodological choices and on the origin of data is crucial. Such transparency would allow users to ensure that they share a common understanding of ESG performance, and allow for better comparability between providers.

In recent years, Europe has seen greater consolidation in the market for sustainability-related services. This could lead to higher risks of dependence upon a limited number of providers, higher prices and to the emergence of new potential conflicts of interest.

Therefore, via this joint position paper, the AMF and the AFM propose the creation of a European regulation that would entrust the supervision of market players operating in the European Union on a professional and commercial basis to ESMA. This regulation would introduce tranparency requirements on methodologies and on identification and management of conflicts of interest. It would provide for organisational and operational requirements to ensure robust processes for data collection and processing. This framework is seen as a starting point, which should be reassessed periodically, taking into account future market developments.

Laura van Geest, Chair of the Dutch Authority Financial markets: “We believe providers of sustainablity-related services play a crucial role for investors in the market for sustainable finance. Many investors depend on them in their investment decisions. Introducing minimum transparency and organisational requirements should greatly benefit this key part of the sustainable finance ecosystem. This joint AMF/AFM position paper aims at contributing to the debate on what regulation of ESG rating and data services providers should look like. We would like to invite regulators, market players and other stakeholders to add their perspectives to this debate.”

Robert Ophèle, Chair of the Autorité des marches financiers: “The sustainable investment market is growing rapidly, but its credibility depends largely on the quality and reliability of the ESG information used. It is with this objective in mind and to ensure investor confidence that we wish to propose with the AFM a European regulatory framework for ESG data and service providers. The construction of such a regulation should be put on the agenda of the renewed sustainable finance strategy and conducted collectively.”

Read this next

Institutional FX

ATFX uses blockchain to help clients verify IBs and vice versa

ATFX said it has been working on the IB verification project for a few months.

Industry News

Research market in dire straits as SEC’s ‘no-action’ letter on MiFID II lapses in June – survey

“Of all the regulatory news that has hit the research market in the last few months, this is the one change that will fundamentally impact what fund managers can access and pay for in future.”

Executive Moves

Wombat appoints ex-abrdn Richard Charnock as UK platform turns to Europe

Launched in 2019, Wombat provides a dedicated mobile investing platform – available on both iOS and Android – offering users both range and choice.

Institutional FX

Broadridge integrates Point Focal’s pre and post-market reports

“Point Focal provides a unique lens on the market which will help add alpha to the trading process and these new insights will rapidly improve performance while mitigating execution risk and simplify trading.”

Technology

XCritical integrates with Brokeree Solutions, allowing its clients to launch copy trading 

The forex software provider – XCritical, has integrated Social Trading by Brokeree Solutions into their CRM system.

Industry News

HKEX partners with Saudi exchange for cross listings, ESG, Fintech

“The Kingdom of Saudi Arabia, and the broader Middle Eastern region, are one of the world’s most dynamic and exciting economic and innovation hubs and also home to some of the fastest growing investor groups in the world. Hong Kong and HKEX’s markets offer significant opportunities for international investors and corporates, including unrivalled connectivity to the Mainland Chinese markets through our unique Connect programmes. This agreement signals the beginning of even greater collaboration between our companies and our home markets, and we look forward to exploring many future areas of cooperation.”

Executive Moves

CMC Markets Connect relocates APAC team led by Peter Foster to Singapore

“Singapore is a vibrant city and is now undoubtedly seen as Asia’s leading financial hub. The decision to bolster the CMC Markets Connect team here will help us cement the company’s position as a leading provider of multi asset liquidity and comprehensive trading solutions across the region.”

Retail FX

Italian watchdog red flags Olympus Brokers, UnicoFX and Allfina Group

Italy’s Commissione Nazionale per le Società e la Borsa (CONSOB) has shut down new websites in an ongoing clampdown against firms it accuses of illegally promoting investment products in the country.

Retail FX

XTB revenues hits zł1.45 billion in 2022, Q4 earnings disappoint

Poland-based Forex and CFDs broker, XTB has reported its final results for Q4 of 2022 and the full fiscal year ending on December 31, 2022, showing one of its most successful corporate years.

<