Institutional Asset Manager Newsletter 09.06.23

The best laid plans

The best of intentions has driven the European Union’s sustainable finance regulations, but they have all too often been dogged by unintended consequences.
The pioneering Sustainable Finance Disclosure Regulations (SFDR) – designed to eliminate greenwashing and which will likely pave the way for similar rules in the US and UK – provides a clear example.
As asset managers strive to secure the lucrative in-flows to ESG funds, so they clamour to attain the ‘dark green’ Article 9 classifications under SFDR.
Yet maintaining such distinction is far from easy and as Brendan Gallen, a funds expert at international law firm Reed Smith, tells us there has been a trend by asset managers to downgrade from Article 9 to Article 8.
But he warns of a "potential grey" area when a General Partner is trying to achieve SFDR classification, created by a lack of effective scrutiny over whether mangers are "truly doing what they say they are doing" in both writing and in practice.
"This is where suggestions of greenwashing have arisen," Gallen says.
The European Supervisory Authorities are consulting on SFDR acknowledging that "the growing demand for ESG investments has been accompanied by an increased demand for high quality sustainability information, although this is not being matched by adequate transparency and comparability on the sustainability impact of the financial products available in the market".
But a possible rewrite of SFDR will only be enough to avert more unintended consequences if asset managers willing to operate under the spirit of the law.
In other news, women are leading the charge when it comes to successful business exits.
J.P. Morgan Private Bank’s Top 200 Women-Powered Businesses report, shows that since 2013 there has been a consistent upward trend in both the volume and total value of exits of businesses founded, led or managed by women in the UK.
This year’s report found that the number of exits for women-owned, led or managed businesses continued to trend upwards over the year, which was not the case for broader high-growth population.
But such trajectories should not distract from the fact that women-powered companies are still underrepresented in the cohort of exited businesses, and they are not achieving the same growth in exit values.
Charlotte Bobroff, Co-head of UK Women & Wealth at J.P. Morgan Private Bank, says: "This is underscored by the fact that a mere 10.9 per cent of all exits by high-growth firms over the past decade were by women-powered businesses, underlining ongoing gender parity challenges women face in harnessing entrepreneurship as a means of wealth generation."
Part of the problem, according to Karen Hewitt, Co-founder & Buying Director at Character.com is access to funding as a result of "bias and discrimination", which is a damning assessment of the financial services sector, and one that we can only hope does not feature in next year’s survey.
Beverly Chandler, managing editor of Institutional Asset Manager, will be speaking and chairing a number of ETF sessions at Informa’s Impower Fund Forum in Monte Carlo 27th and 28th June, 2023 – including one on thematic ETFs.
The agenda is here, and we are very pleased to be able to offer our readers a 10 per cent discount on tickets, using this link or this discount code FKN3253EMSPK.
Gill Wadsworth, Editor
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