The European Funds and Asset Management Association (EFAMA) has welcomed the European Securities and Markets Association (ESMA) sustainability rules into investment management although warns the countries will not have long enough to implement the initiatives.

In a response to ESMA, EFAMA stated: “The Commission is suggesting only twelve months which is far too little time considering that changes to the UCITS Directive, AIFMD and MiFID Level 2 must be implemented into Member States’ national laws first.”

However, EFAMA was not entirely critical of the proposals, welcoming ESMA’s “high-level-principles-based approach, which acknowledges the principle of necessary proportionality based on the firms’ investment strategy and underlying assets of each investment product”.

EFAMA would also like the definition tightening up, stating a “clear understanding of the notion of ‘sustainability risk’ is critical”. The lobbying group added that sustainability risk should be considered as a material risk to the financial performance of an investment based on sustainability considerations and “not as externality risks that may be posed from investments to environment and society at large”.

EFAMA’s Director General Tanguy van de Werve comments: "ESMA’s high-level approach is a positive one as it ensures the level of flexibility required in view of the rapid market and regulatory developments in the area of sustainable finance. 

“We consider that sustainability risks and related opportunities can be material drivers, and therefore important, alongside other factors, in assessing investment risks and opportunities. With this in mind, we call ESMA to ensure that the notion of sustainability risk is to be linked to the financially material impact on an investment and that a consistent application among the different ongoing consultation and legislative process is in place.”