2022, the year of ESG acceleration

In the past 12 months, the Sustainable Finance and Sustainability Framework of the EU has gained in content and sophistication. The early adoption standards such as Sustainable Finance Disclosure Regulation (SFDR) have triggered a first, relatively generic, change in the investor disclosures, but already a major change in the competitive environment: the market trend towards ESG products now materialises and is very likely to reach the approx. 60% AuM level that we predicted for 2025, much earlier.

2022 will likely be a watershed moment in the EU’s ESG regulatory calendar. Starting from the 1st of January, we will see the EU Taxonomy for climate change mitigation and climate change adaptation coming into force. During the rest of the year the implementation of amendments to MiFID II, UCITS/AIFMD, IDD and Solvency II, as well as the application of the RTS ‘Single Rulebook’ (Level 2) will follow. 

This string of regulatory changes will substantially impact the business conduct and product design, but also the data gathering:

• Target market encompassing the investors’ sustainability preferences;

• SFDR Principal Adverse Impacts: Collection of data for the first reporting period
  (i.e. 1/1/2022 to 31/12/2022);

• SFDR Level 2 products template impacting investment strategies and allocation limits for ESG investments, sustainable investments and remainder investments for each art. 8 and art. 9 type of UCITS or AIF;

• Taxonomy on climate sets the screening criteria for all economic sectors.

In light of this massive shift and acceleration in regulatory momentum, we largely expect 2022 to represent acceleration – as players alter their investment, risk and reporting strategies in order to ensure compliance. 

That being said, once the regulatory dust settles and players adapt accordingly – we believe that 2022 will truly set the scene for ESG investing to become the rule rather than the exception in the European AWM landscape.