The EU Green Deal launched an EU Action Plan during 2021 that will keep us busy for the next few years and avoid greenwashing. For example, the groundwork has been laid to direct more capital flows into sustainable investments (i.e. sustainable finance). There are many changes to come and the challenge is to manage them well and adapt to the new normal.
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ESG funds (sustainable finance)
ESG requires a rethink in the way we approach customers. Sustainability forms a new long-term target dimension in advisory services for customers, which opens up opportunities and requires additional employee qualifications.
Doing business sustainably means ensuring resource-efficient and fair value creation and adequately managing physical and transitory risks. The globally recognized sustainability goals are made up of the UN’s 17 SDGs (Sustainable Development Goals) and the limitation of global warming according to the Paris Climate Agreement.
Clear targets are urgently needed to drive the market. The low share of ESG funds in Europe shows the still significant potential for sustainability in financial investment.
The MiFID 2 regulations are supplemented by sustainability preferences (Delegated Regulation and Taxonomy Regulation) and reporting standards (Disclosure Regulation) and financial instruments are divided into the following categories on the client side:
- A) A financial instrument where the customer specifies that a minimum proportion should be invested in environmentally sustainable investments within the meaning of Article 2(1) of Regulation (EU) 2020/852
- B) A financial instrument for which the client determines that a minimum proportion shall be invested in sustainable investments within the meaning of Article 2, point 17 of Regulation (EU) 2019/2088
- C) A financial instrument where the main adverse impacts on sustainability factors are taken into account, with the qualitative or quantitative elements used to demonstrate such consideration being determined by the client or potential client
On April 21, 2021, the Commission adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD) that amends the existing reporting requirements of the Non-Financial Reporting Directive (NFRD). The proposal extends the scope to all large companies and all companies listed on regulated markets (except listed micro-entities) and requires verification (assurance) of the reported information.
Other key points are:
- Full coverage of sustainable development issues (environmental, social and governance).
- CSRD introduces more detailed reporting requirements and the obligation to report according to the mandatory EU standards for sustainability reporting. I.e. standardized reporting standards that promote comparability.
- Demanding in terms of “double materiality” approach and quality of data (criteria: relevant, faithful, comparable, understandable and reliable).
- To be included in the management report.
- Shall be transferred into an electronic format from the beginning. I.e. companies must digitally “tag” the reported information so that it is machine-readable and can be included in the single European access point envisaged in the Capital Markets Union action plan.
In addition to individual consulting, we will offer masterclass training on the following topics starting in 2022:
- Masterclass ESG-Management and Reporting
- Masterclass Financial Management
- Masterclass Business Planning
The right, comprehensive approach to ESG-Management is to define a sustainability strategy and implement it at all levels of the company, if possible. Design opportunities for arise in all process steps of the value chain and can lead to a better understanding of customers. Sustainable finance is one of the underlying topics. The focus is on what the customer sees and notices. Contact us to define and implement your sustainability strategy.