Climate Finance Policy Engagement Analysis
Climate Lobbying Overview: The European Fund and Asset Management Association (EFAMA) is actively engaged in the EU on climate-related finance policy, while often not supporting stringent regulatory intervention.
Top-line Messaging on Climate-Related Financial Policy: EFAMA broadly supported the need for a sustainable finance framework in the EU in a 2024 white paper, however, pushed for the existing legislation to be ‘streamlined’. In comments on the European Commission consultation on the Renewed Sustainable Finance Strategy in 2020, EFAMA suggested policy should focus on positive action but not restrict negative action. Former president of EFAMA, Naïm Abou-Jaoudé, did state strong support for the Renewed Strategy during 2021.
Position on Regulated Corporate Climate Disclosure: In a consultation response to the first set of European Sustainability Reporting Standards (ESRS) being developed by EFRAG in 2022, EFAMA stated broad support but cautioned against some of the specifics on the disclosure standard requirements. EFAMA criticized the Commission’s weakening of the ESRS through the introduction of materiality assessments in a 2023 comment. In this consultation response and in an industry joint letter, EFAMA advocated for making climate disclosures mandatory irrespective of the materiality assessment, and removing phase-ins for disclosures needed under the Sustainable Finance Disclosure Regulation (SFDR). During 2022, EFAMA was strongly supportive of an ambitious approach to the global sustainability standards in comments to the International Sustainability Standards Board (ISSB), arguing for the inclusion of double materiality.
Position on Climate Standards, Labels & Benchmarks, and ESG Ratings: In response to a 2023 ESMA consultation on greenwashing, EFAMA supported weakening the definition of ‘sustainable investment’ to include transitioning products, and supported a ‘principles-based’ product categorization system rather than one based on minimum criteria in a 2023 consultation response. In addition, in feedback to the European Securities and Markets Authority (ESMA) in 2022, EFAMA did not support efforts to introduce quantitative thresholds for fund names using ESG or sustainability-related terms, arguing that it went beyond SFDR requirements and should be up to the co-legislators to introduce new rules. However, in a 2024 position paper EFAMA supported retaining the ambition of EU Benchmark Regulation to allow asset managers to fulfil their reporting requirements under SFDR. In a 2023 consultation response EFAMA supported ESG ratings regulation in the EU and pressed for increased ambition in line with IOSCO recommendations.
Position on Integrating Climate into Investor Duties and Risk Management: EFAMA stated a number of exceptions to changes proposed under the SFDR review published by the ESAs in 2023, including the removal of entity-level PAI disclosures. It also stated strong concerns on the alignment between the SFDR and the ESRS, which it also included in feedback to the Commission, urging to either make all SFDR-relevant indicators mandatory under the ESRS, or for financial institutions to not be required to disclose non-material indicators under the ESRS. EFAMA supported the incorporation of sustainable investment information into the Pension Benefit Statement in the EU in a 2023 consultation response on IORP II.