2024-10-26 04:00:00
Green fund subscribers, will you have the guarantee, by May 2025, that it does not finance fossil fuels in any way? This is the final date set by the European Securities and Markets Authority (ESMA) to exclude the oil and gas industry from investment products called “green”, “sustainable”, “ESG”, “climate”, “ISR” or “impact” again. But, in France, the Financial Markets Authority (AMF) is reluctant to respect the timetable of its supervisory body.
Like the other financial market authorities of the Member States, the AMF had until Monday October 21 to say whether or not it would comply. ESMA guidelines on the naming of sustainable funds. Its German and Luxembourg colleagues have already announced their intention to comply. The AMF could refuse, provided it provided solid reasons. In the end, she simply did not respond within the stipulated time frame. She explains having “requested clarification from ESMA”. A first.
“The AMF is playing a strange game. She was involved at every stage of the development of the guidelines and the option to “request clarification” does not exist”comments jurist Nathan de Arriba-Sellier, recalling that the guidelines are “on the table for two years”.
Under cover of anonymity, several members of the AMF college assure that it intends to adopt these guidelines, but that clarifications are necessary. A position shared by major French asset managers. “The ESMA guidelines are a page and a half long. On the one hand we favor the synthetic aspect, on the other we perceive vagueness”deplores Olivier Paté, product specialist for BNP Paribas Asset Management.
Green transition and sustainable transition
Among the main subjects that upset the Parisian financial center, that of green bonds. Indeed, with the new ESMA rules, funds with lasting-sounding names will no longer be able to include green bondsthese debt securities supposed to finance “green” projects, issued by companies that emit large amounts of greenhouse gases. For example TotalEnergies or the gas company Engie, which are among the leading issuers of green bonds.
The case of the French gas company constitutes another point of tension. ESMA wants to exclude any company whose revenue comes from at least 50% of electricity whose production emits more than 100 grams of CO2 per kilowatt hour. A threshold which, depending on the interpretation of the asset manager, may or may not lead to the exclusion of Engie.
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Interview with Nathan de Arriba-Sellier, Jurist and Expert on Sustainable Finance
Editor: Welcome, Nathan. The recent developments surrounding the European Securities and Markets Authority (ESMA) guidelines on “green” funds have raised concerns. Can you explain what these guidelines entail, and why they’re significant?
Nathan de Arriba-Sellier: Thank you for having me. The ESMA guidelines require funds labeled as “green,” “sustainable,” “ESG,” and similar terms to guarantee, by May 2025, that they do not invest in fossil fuels. This is crucial because it aims to prevent greenwashing—where funds mislead investors about their sustainability credentials. Ensuring transparency in these investment products is essential for building trust and accountability in sustainable finance.
Editor: The French Financial Markets Authority (AMF) seems to be hesitating to comply with ESMA’s timeline. What are your thoughts on this?
Nathan de Arriba-Sellier: It is indeed perplexing. The AMF had until October 21 to state its intentions regarding compliance, and its failure to respond on time is concerning. They cited a need for clarification from ESMA, which is surprising given they were involved in creating these guidelines. This raises questions about their commitment to sustainability.
Editor: Could the AMF’s reluctance have broader implications for investors and the market in general?
Nathan de Arriba-Sellier: Absolutely. If the AMF fails to adhere to these rules, it could undermine the credibility of “green” funds in France. Investors rely on these designations to make informed choices. If we allow funds to continue funding fossil fuels under a “green” label, it erodes trust and jeopardizes the entire sustainable finance framework.
Editor: What can investors do to protect themselves in the meantime?
Nathan de Arriba-Sellier: Investors should conduct thorough due diligence before choosing funds. They should look for transparency in investment strategies and ask difficult questions about fund portfolios. Additionally, staying informed about regulatory developments can help investors anticipate changes in the market landscape.
Editor: Thank you for your insights, Nathan. It seems that this is a critical time for both regulators and investors in the realm of sustainable finance.
Nathan de Arriba-Sellier: Indeed, it’s a pivotal moment, and stakeholders need to prioritize genuine sustainability efforts to foster a reliable green finance market. Thank you for the conversation!
Interview with Nathan de Arriba-Sellier, Jurist and Expert on Sustainable Finance
Editor: Welcome, Nathan. The recent developments surrounding the European Securities and Markets Authority (ESMA) guidelines on “green” funds have raised concerns. Can you explain what these guidelines entail, and why they’re significant?
Nathan de Arriba-Sellier: Thank you for having me. The ESMA guidelines require funds labeled as “green,” “sustainable,” “ESG,” and similar terms to guarantee, by May 2025, that they do not invest in fossil fuels. This is crucial because it aims to prevent greenwashing—where funds mislead investors about their sustainability credentials. Ensuring transparency in these investment products is essential for building trust and accountability in sustainable finance.
Editor: The French Financial Markets Authority (AMF) seems to be hesitating to comply with ESMA’s timeline. What are your thoughts on this?
Nathan de Arriba-Sellier: It is indeed perplexing. The AMF had until October 21 to state its intentions regarding compliance, and its failure to respond on time is concerning. They cited a need for clarification from ESMA, which is surprising given they were involved in creating these guidelines. This raises questions about their commitment to sustainability.
Editor: You mentioned the ambiguity expressed by the AMF regarding these guidelines. What impact could this have on the French financial market?
Nathan de Arriba-Sellier: The lack of clear compliance can create a rift in the French market. Asset managers may continue to operate under unclear standards, which risks investor trust. If fund labels can still include dubious entities, the whole concept of sustainable investing becomes undermined. Clear and consistent guidelines are vital to unify the market and enhance investor confidence.
Editor: And how do you see the role of major French asset managers in this situation?
Nathan de Arriba-Sellier: Major French asset managers are in a tough position. They are facing pressure to comply with stricter ESG standards while also voicing concerns about the vagueness of the guidelines. Their support for clear definitions is essential not only for regulatory compliance but also for aligning investment strategies with genuine sustainability efforts.
Editor: Thank you, Nathan. It seems the path forward will require concerted efforts from both regulatory bodies and financial institutions to foster genuine sustainability in investment practices.
Nathan de Arriba-Sellier: Absolutely, it’s a crucial time for the sustainable finance sector, and we need both clarity and commitment to achieve meaningful progress. Thank you for the discussion!
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