Smaller fund providers are being disproportionately burdened by the regulation of sustainable funds, according to the German funds association.
The regulations are also driving demand for ESG specialists, stated the BVI in its latest review of the German sustainable fund market.
More specifically, there is an increasing demand for ESG research analysts, even though the number of sustainable fund launches has reduced recently.
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Another cost facing firms is sourcing sustainability data, a cost which is exacerbated by a reliance on expensive external data providers.
“While each additional data vendor does not only rise the budget needed, it does also increase the complexity of the managers operations: barely comparable rating scales, conflicting data points, missing observations, internal quality checks.”
Of particular concern to the BVI is how these cost increases will lead to an unfair burden on smaller fund managers. “These managers are less able to compensate the increasing burden by their economies of scale,” it stated.
