Global Trustee and Fiduciary Services News and Views Issue 50

Prime, Futures and Securities Services | XXXXXX 24 Disclosure: Ensure that asset managers, institutional investors, insurance distributors and investment advisors include environmental, social and governance (ESG) factors into their investment decisions and advisory processes as part of their duty to act in the best interest of investors or beneficiaries. Asset managers and institutional investors who claim to pursue sustainability objectives would have to disclose how their investments are aligned with those objectives. This means greater transparency towards end-investors, ensuring comparability between products and discouraging ‘green-washing’ or misleading information. Taxonomy: Provide clarity on what sustainable investments are by creating an EU-wide classification system or taxonomy to provide businesses and investors with a common language to identify what degree economic activities can be considered environmentally sustainable. This is a first and essential step in efforts to channel investments into sustainable activities. Suitability: Ensure that investment firms and insurance distributors integrate sustainability preferences into their suitability tests when offering advice to investors and that the products offered meet their clients’ needs. Benchmarks: Create new benchmark category for low-carbon and positive-carbon impact benchmarks, fostering a generally accepted market standard to measure a companies footprint, and in consequence, an investment portfolio’s carbon footprint. This would give investors who want to invest in low-carbon strategies an appropriate tool to enable them to compare the performance of their investment. Environmental Taxonomy Conditions for identifying: Environmentally- sustainable economic activities; Defines the 6 EU environmental objectives to which economic activities will have to contribute to be considered eligible; and Empowers the Commission to establish technical screening criteria and frames how these criteria would have to be identified. 1 2 3 SUSTAINABILITY SERIES: EUROPEAN COMMISSION PROPOSE NEW RULES FOR A SUSTAINABLE FUTURE Aim: to make it easier and less costly for investors to identify which investments are sustainable, putting environmental, social and governance risks at the heart of the investment process. Published on 24 May 2018, what is the new legal framework looking to achieve?