A ‘greenwash checker’ tool has been launched for investors seeking to assist asset managers in the labelling of their products ahead of the EU taxonomy regulation, which will dictate the products that can be called ‘green’ or ‘sustainable’.
Impact-Cubed, a spin-off company of Auriel Investors offering sustainable methodology to the investment community, has unveiled a ‘greenwash checker’ or pre-screening service to asset managers and asset owners to allow them to check their compliance with the upcoming EU taxonomy regulation.
The legislation will establish an EU-wide regulatory framework as to what constitutes environmentally sustainable economic activities and is intended to hold asset managers and asset owners to account with regard to which investment products are labelled as environmentally friendly, according to Impact-Cubed.
Impact-Cubed’s research advisor Antti Savilaakso explained: “The European Commission intends for the EU taxonomy regulation to facilitate capital flows to environmentally sustainable economic activities, but also to curb investment product greenwashing via regulated disclosures.”
There is much confusion regarding the different definitions and a wide variety of investment approaches that groups use under the environmental or sustainable umbrella, and Savilaakso pointed out they look quite different when seen through the EU green taxonomy lens.
“There is a risk for many investors that their funds could be labelled as ‘greenwash’ if they fall outside what EU regulators define as sustainable. That is why this new pre-screening service, or greenwash checker, will be an important tool for many investors.”
James Clark, senior fund analyst at Hawksmoor Investment Management, said there is a place for this kind of tool in the industry, but most groups will be carrying out their own qualitative research.
“It is important to carry out your own research, there is no stamp that says ‘greenwash’ that can be applied.
“With the EU framework and the Investment Association’s framework and labelling in the UK, this is important and it is a positive development.
“But I think it will take a couple of years to become established and for
people to become familiar with the different labels,” he said.
The taxonomy regulation will apply to the majority of asset management, pension, and insurance firms, starting from December 2021.