Recommendations for Sustainable Finance Disclosure Regulation
The Association of Chartered Certified Accountants (ACCA) releases recommendations for European Sustainable Finance Disclosure Regulation, aimed at simplifying the disclosure burden for financial market participants and promoting sustainable transition.
The EU released a proposal in the first quarter of this year to simplify sustainable financial regulatory policies and solicited suggestions from stakeholders on simplifying Sustainable Finance Disclosure Regulation.
Related Post: European Commission Released a Proposal to Simplify Multiple Sustainable Regulations
Restrictions on Sustainable Finance Disclosure Regulation
The ACCA believes that the European Sustainable Finance Disclosure Regulation can increase investors’ transparency in sustainable practices, encourage asset management companies to take on more responsibility, and emphasize the integration of ESG in investment decisions. However, the Sustainable Finance Disclosure Regulation also have the following limitations:
- Large data resources: If asset management companies comply with regulations, they need to collect and analyze a large amount of ESG data, which increases compliance costs and puts pressure on budgets. The EU can consider reducing the data disclosure burden on asset management companies and concentrating on sustainable data that investors are most concerned about.
- Lack of constraint mechanism: Although regulations have established disclosure requirements, there is currently no constraint mechanism in place. If asset management companies fail to comply with sustainable practices, they will not be affected, therefore regulations should consider establishing constraint mechanisms.
- Applicability for small companies: Small asset management companies often have limited resources and may face difficulties in implementing regulations. Therefore, the EU needs to consider whether to add exemption clauses for small companies.
- Insufficient attention to social factors: The regulation pays more attention to environmental sustainability factors and less attention to social sustainability factors. The EU can consider evaluating social factors in regulation and including them in financial products.
Classification in Sustainable Finance Disclosure Regulation
The ACCA believes that the current classification of Article 6, Article 8, and Article 9 funds is aimed at preventing asset management companies from mislabeling sustainable funds. The EU can consider a more consistent classification approach and whether the addition of new categories will have new impacts on the market. In the process of revising the Sustainable Finance Disclosure Regulation, the EU also needs to consider whether the existing fund classification system can be interoperable with the UK’s financial product investment labeling regime.
In terms of the global cooperation mechanism for Sustainable Finance Disclosure Regulation, the ACCA believes that this regulation will have a positive impact on global sustainable financial regulatory policies and reduce greenwashing risks.
Reference:
Revision of the Sustainable Finance Disclosure Regulation
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