Finance

Sustainable finance: transparency is now

“You can’t become sustainable in a snap of your fingers.” “It’s complex.” “It takes time.” This kind of excuse will soon disappear from the vocabulary of financial intermediaries. From next Wednesday, they will have to show more transparency about the sustainability of their investments. On March 10, the first provisions of the European SFDR regulation on the disclosure of information on sustainable finance come into effect.

Read also: Sustainable finance: asset managers raise their voices against companies

This text aims to enable customers to obtain more information on the consequences of their investments, in a standardized and more easily comparable manner. And therefore to fight against the greenwashingthe bane of green investments. Banks and managers, including in Switzerland (because they have European clients), will have to show their progress in terms of sustainability.

To watch: Sustainability, this new pillar of finance

It’s a real chain reaction that will begin next Wednesday. The websites of financial institutions will be enriched with a new declaration, on the way in which they take into account the negative consequences of the activity of the companies in which they invest. We are talking about the consequences on the climate and the environment, but also on social aspects, respect for human rights or corruption. This main negative impact statement will be compulsory for banks and asset managers employing at least 500 people; smaller players will have the choice of displaying this information or explaining why they consider these aspects to be irrelevant to their investments.

On the right side

Given the growing interest of clients and the importance of the market for ESG investments (which use environmental, social or governance-related criteria), everyone will probably want to be on the side of those who apply this rule, and not those who must explain why they balk.

As of June 30, the major financial intermediaries will in any case have to collect a wealth of information on the companies in which they invest. On their carbon intensity, their water use, their waste management, their diversity policy, any pay gaps between their male and female employees. Information that the companies in question will be asked to provide, even at the cost of significant additional work.

These companies will be able to rely on the other European novelty: the taxonomy, a classification of activities considered to be sustainable and non-sustainable. Real economy players will have to disclose how much of their capital expenditure and operational expenditure contributes positively to environmental criteria.

Separating the wheat from the chaff

For these companies, this information is also a means of presenting themselves as an asset worthy of investment, which applies good practices. Investors will find in this data enough to identify riskier companies but also those that have decided to improve their profile. Those who have defined ecological transition strategies, for example. The best investment opportunities, in short. The sustainable side (or not) of financial products should also be better described.

the greenwashing will it suddenly disappear? These new provisions introduce monitoring over time of the performance of companies and the investors who support them. From year to year, end customers will be able to see if the former and latter keep their promises. If the quantities of CO2 emitted decrease, if the carbon intensity of the portfolios declines. It will of course take several years for the trends to appear. But behavior will have to change: vague promises to offer a so-called green investment fund will no longer hold up against objective and comparable figures. Transparency is now – March 10, to be exact.

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