At the end of last year, the European Commission approved the CSRD, a step forward in the development of sustainable investment. In accordance with this regulation, from 2024 onwards, all large companies in the European Union will have to regularly report information regarding their social and environmental impact and the sustainability risks to which they are exposed. What does this imply for asset management?
Several experts reflected on this during the 26th edition of the FundsPeople Legal Debate. According to Miguel Sánchez Monjo, partner at Cuatrecasas, "the focus will now shift to investors and, therefore, also to fund managers. They will have extensive information on how companies are dealing with ESG factors: the risks they face, how they impact society and the environment, etc. Fund managers will therefore be expected to take all this information into account in a real and decisive manner". This regulation will also have to be reconciled with the future European Directive on corporate due diligence in the field of sustainability. Most companies that are subject to the CSRD will have to conduct due diligence on whom they contract in their value chain and verify whether they take ESG factors into account", he added.
Alfredo Oñoro, Director of Regulatory Compliance at Cecabank, believes that there is still a long way to go: "Logically, the deadlines are very tight. Credit institutions are more accustomed to this because they have been reporting for some time now. We have to wait to see how the remaining companies adapt and the depth of the information reported", he stated. As a result, he believes that the impact next year will still be moderate.
Working towards clear criteria
That said, "there is still some way to go to further clarify the criteria and to be able to differentiate with greater depth between products. Following this adjustment process, investors will be able to better distinguish between the different products in retailers' portfolios", Oñoro added.
"How can it be that fund managers have been under the obligation for two years to comply with sustainability regulations and the regulation that provides the raw material to be able to meet these obligations is just now being introduced?" criticised Elisa Ricón, CEO of Inverco. In any case, she highlights one positive aspect of all this: "The European platform, better known by its acronym ESAP (European Single Access Point), which aims to have a single, open, public and free access point where all companies can upload their sustainability information in a readable format", she added. In her opinion, it will be a relief for fund managers, "for whom expenditure for the use of information (credit and sustainability ratings, indices or market data, among others) is constantly increasing".
Finally, according to Barbara Gonzalez, counsel at Linklaters, it is estimated that this new standard will increase the number of companies subject to non-financial reporting obligations by a factor of five. "We will also see how we are doing in terms of deadlines. The first group of companies subject to reporting under the CSRD have to start complying in 2024. In Spain, the directive has yet to be transposed (the public consultation phase has just ended). We hope that legislators act in time and we avoid misalignments", she warned.
