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According to a prominent Irish central banker, the European Union (EU) will not be instituting a retail labelling framework in the near future. This system would help to deter false sustainability assertions made by investment funds to draw capital.
Just this week, the United Kingdom, which exited the EU, revealed a new scheme to label funds with the aim of curtailing greenwashing - the practice of making unverified claims about sustainability.
Derville Rowland, the deputy governor of the Central Bank of Ireland, discussed that while there are currently no immediate plans, the EU's prime authoritative body, the European Commission, may reconsider instituting a labelling framework for investment products further down the line.
The ESMA, the EU's securities regulator and on whose board Rowland serves, expressed last month that the absence of uniform labelling can possibly cause confusion among retail investors trying to discern whether a fund is sustainable or not.
"EU not keen on jumping instantly to a labelling scheme"
During the Irish Funds conference held in London, Rowland commented that the EU is not likely to jump too quickly on establishing a labelling system. Ireland, housing 1.2 trillion euros (equivalent to $1.31 trillion) of ESG investments, is a notable EU hub for listing funds. A significant number of these funds are managed from London.
Rowland cleared that Ireland wouldn't impose a labelling system unilaterally, preferring to align closely with the EU's strategies. She mentioned the EU is currently seeking input on marginal alterations to its Sustainable Finance Disclosure Regulation (SFDR), responsible for directing how asset managers should disclose ESG factors.
Anticipated pushback on further ESG rules
Rowland admitted that the EU might face resistance in implementing more ESG-oriented regulations, as compliance exhaustion seemingly descends.
Potential labelling regulations will most likely be proposed by the newly appointed European Commission due in fall of next year, indicated Rowland.
"As of now, we should concentrate on implementing what we currently have well," she concluded.
