Sustainability in EU Capital Markets: New Rules for Fund and Asset Managers Ahead

Currently in the European Union, no level playing field exists for asset management and rating agency activities when it comes to ensuring sustainability. The European Securities and Market Authority ("ESMA") is proposing amendments to certain Level 2 legislation and guidelines to make integration of environmental, social, and governance ("ESG") factors mandatory for asset managers, investment advisors, and credit rating agencies ("CRAs"). If implemented, EU-based asset managers and investment advisors will need to review their existing investment and advisory processes with regard to ESG. If they have not yet implemented such processes, they will need to develop adequate investment and advisory processes integrating ESG factors. EU-based CRAs also may need to disclose ESG factors when these are considered as part of a credit rating action.

This White Paper examines each of the new ESG integration proposals and outlines their possible impact on asset managers, investment advisors, and CRAs.