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Sustainable finance: transparency is now

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“You can’t become sustainable with the snap of your fingers.” “It’s complex.” “It takes time.” These kinds of excuses will soon disappear from the vocabulary of financial intermediaries. As of next Wednesday, they will have to show more transparency as to the sustainability of their investments. On March 10, the first provisions of the European SFDR regulation, on the disclosure of information in sustainable finance, come into force.

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This text aims to allow customers to obtain more information on the consequences of their investments, in a standardized and more easily comparable way. And therefore to fight against the greenwashing, the plague of green investments. Banks and managers, including in Switzerland (because they have European customers), are going to have to show their progress in sustainability.

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It’s a real chain reaction that will start next Wednesday. The websites of financial institutions will be enriched with a new statement on how they take into account the negative consequences of the activity of the companies in which they invest. We are talking about the consequences on the climate and the environment, but also on social aspects, respect for human rights or corruption. This main statement of adverse effects will be mandatory for banks and asset managers employing at least 500 people; smaller players will have the choice of displaying this information or explaining why they consider these aspects to be irrelevant to their investments.

In the right camp

Given the growing interest of clients and the importance of the market for ESG investments (which use environmental, social or governance-related criteria), everyone is likely to want to be on the side of those who apply this rule, and not those who apply this rule. who must explain why they balk.

As of June 30, major financial intermediaries will in any case have to collect a wealth of information on the companies in which they invest. On their carbon intensity, their use of water, their waste management, their diversity policy, any pay gaps between their male and female employees. Information that the companies in question will be asked to provide, even at the cost of significant additional work.

These societies will be able to rely on the other European innovation: taxonomy, a classification of activities considered as sustainable and unsustainable. Actors in the real economy will have to reveal how much of their investment and operational spending positively contributes to environmental criteria.

Separate the wheat from the chaff

For these companies, this information is also a way of presenting themselves as an asset worthy of investment, which applies good practices. Investors will find in this data enough to identify the most risky companies but also those which have decided to improve their profile. Those who have defined ecological transition strategies, for example. The best investment opportunities, in short. The sustainable side (or not) of financial products should also be better described.

The greenwashing will it suddenly disappear? These new provisions establish monitoring over time of the performance of companies and the investors who support them. Year after year, end customers will be able to see if the former and the latter keep their promises. If the quantities of CO2 emitted decrease, if the carbon intensity of the portfolios decreases. It will of course take several years for the trends to appear. But behavior will have to change: the vague promises to offer a so-called green investment fund will no longer hold up against objective and comparable figures. Transparency is now – March 10, to be precise.

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