The ESG Review: Is there a post-summer greenwashing clampdown ahead?

As politicians - even those with desires on Downing Street - prepare for their summer breaks, there is a sense that some are warming up for a rapid regulatory push on ESG data provision when they’re back from the beach.

With more and more talk around the need to introduce compliance measures to reduce the risk of greenwashing in asset management, pressure seems to be quietly growing for a formalisation of how ESG performance is rated, with methods coming under much greater scrutiny.

At a European level, an “influential” member of an advisory board to the European Commission waded in with a pre-holiday parting shot on why regulation should standardise how information is compiled and presented, pointing out that many other aspects of investment are heavily regulated.

ESG data provision is a growing discipline that is subject to rising concerns around how truthful and accurate some information is. As the FT put it: “​​Last month the European Securities and Markets Authority (Esma) said feedback it had received on the ESG data sector showed “an immature but growing market” which, following several years of consolidation, has seen the emergence of a small number of large non-EU headquartered providers.”

In the UK, the Financial Conduct Authority is already seemingly on the case having initial meetings with investment managers about its plans to introduce new levels of data scrutiny, and while no stings have been undertaken says that it is “actively monitoring the market” for traces of greenwashing.

The FCA is due to begin consulting on environmental disclosure measures in the autumn, and says that timeframe will allow international business to consider other regulation, such as that being driven through by the Securities and Exchange Commission in the US, before then sharing perspectives with the UK regulator.

The FCA has already stated its intention here. “A key outcome of our ESG Strategy is to promote ‘integrity in the market for ESG-labelled securities, supported by the growth of effective service providers – including providers of ESG data, ratings, assurance and verification services.’” it said.

Quite how this will all shape up after the summer remains to be seen. But all the signs are there of new rules that will compel accurate, factual, verified and well-worded disclosures, and the further information that stems from them.

This column is also taking a break for a few weeks and will return in August.

The ESG News Review is written by Steve Earl, a Partner at BOLDT

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