Thomas Richter, the head of Germany’s main fund association, has criticised EU rules for increasing costs in asset management that result in firms finding it difficult to invest in their businesses.
He argued that the friction created by certain “well-intentioned but poorly made” rules reduced the money available for the industry’s digitalisation and lowered the global competitiveness of EU asset managers.
Richter, who is chief executive of Germany’s BVI funds trade body, wants EU authorities to “anchor” global competitiveness of the industry into future regulatory initiatives.
Speaking at a press conference recently, he resurfaced the BVI’s criticism of Priips information documents as one of the sets of rules that slowed down investment and even acted as an obstacle to the EU realising its own aim of unifying capital markets.
The Capital Markets Union (CMU) project, he said, had “hardly made any headway” since its launch in 2015.
“For years the EU itself has been preventing the success of the Capital Markets Union, primarily through mistaken consumer protection.”
The CMU includes aims for the free flow of capital around the EU, but a multitude of rules, he said, formed one of the biggest obstacles for investors to invest in companies. These rules include the Priips information documents, which make property funds sound “toxic”.
Richter wants the greater focus on industry competitiveness to align with the EU’s central mission of creating greater investor protection and market stability, which have been major regulatory aims since the 2008 financial crisis.
Richter also aimed some criticism at the EU approach to sustainable investment.
He said the BVI would attempt to standardise the minimum requirements for sustainable investment products throughout the EU, arguing that current measures – which are designed to counteract any greenwashing – do not go far enough.
The EU’s taxonomy and Disclosure Regulation are mainly about transparency but are of “limited use” in determining what is ‘sustainable’, said Richter.
He said: “It is not the task of the fund industry to decide whether nuclear energy or natural gas are sustainable. However, it is important to main the taxonomy’s function as a benchmark for the assessment of sustainability.
“Therefore, taxonomy should be based strictly on scientific findings and, in case of doubt, exclude controversial topics.”
Currently in Germany, the financial regulator BaFin has guidelines for sustainable investment funds, which require compliance with several minimum exclusions. The BVI argues regulators should not be making opinions on the sustainability of energy sources.
Ricther also said the financing of an entire economic transformation should be the “overarching goal” of sustainable finance, rather than financing a “green niche”. This means sustainable funds should be allowed to invest in companies with poor sustainability scores in order to drive change through shareholder engagement.
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