This year will be the year of sustainable finance, according to the Association of the Luxembourg Fund Industry (ALFI).
During the ALFI European Asset Management Conference, Corinne Lamesch, ALFI chairperson discussed sustainability with Marco Zwick, director, Commission de Surveillance du Secteur Financier (CSSF).
This follows the recent implementation of the new Sustainable Finance Disclosure Regulation (SFDR) amid the growing importance of environmental, social and governance (ESG) in financial services.
While funds promoted as ESG are expected to classify as being Article 8 or 9 products, Lamesch notes there is no strict obligation for ESG or sustainable funds to refer to Article 8 or 9 in their perspectives.
She says: “It would make sense to openly share this information as it would create more transparency for stakeholders, investors, and it would also allow for market statistics in Luxembourg and Europe on how much funds we really have within this criteria.”
Zwick also affirms that there is no obligation for this now but with regards to the draft regulatory technical standards (RTS) there are requirements around ‘light green’ and ‘dark green’ products.
Light green products can be classed as having environmental or social characteristics among other characteristics and products with sustainable investment objectives can be classed as dark green products.
“I think the RTS will foresee this type of categorisation and the next challenge then will be how we automate this process. It is the information that will be very important especially if you hear some studies which have been done by a number of companies saying that more than two-thirds of funds are not in these categories,” notes Zwick.
Later in the panel, Lamesch also touched upon the topic of covid highlighting the pandemic is not yet over. She says: “If we look at last year, at the same time in March, the industry experienced some very bumpy months.”
“We had just moved into lockdown and started to work from home. But if we look at today, it looks like the Luxembourg fund industry is back to normal.”
Looking at assets under management, Lamesch points out they reached an all time record of over $5 billion.
Discussing what lessons can be learned from the pandemic for the future, Zwick comments: “The industry has already learned lessons from 2008. That was a painful exercise, where you could say the banking sector was much more involved than anybody else.”
Zwick notes that August last year was the first month of the year where the industry could say it had recovered and since then it has moved in that trend.
“I believe the fund industry is not the source of the problem and it is not a very important part of the solution. It is much more on the asset management side to do the right investments and do sustainable investments to help for the future, and that is very important.”
In terms of lessons learned from March, Zwick says the new ways of working -working from home- worked very well. He suggests that the industry was well equipped for this and has highlighted a lot of maturity.
Zwick also adds that liquidity management was an important lesson learned and that there seem to be much more liquidity management tools at the industry’s disposal that have been used.
Concluding the panel, Lamesch says: “Sustainable finance is going to continue to be a major topic going into the future. There is a lot of work ahead of us.”
