65% of EU members surveyed by the CFA Institute have picked the lack of reliable ESG data as one of the biggest challenges for asset managers in implementing the EU Sustainable Finance Disclosure Regulation (SFDR).
The study by the CFA Institute, a global association of investment professionals, has revealed challenges within the EU’s current ESG regulatory framework, specifically the SFDR and the EU taxonomy regulation. The research has also provided recommendations for the new parliament to address these issues.
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The survey of CFA Institute members across the EU highlights a range of challenges that investors face concerning ESG disclosures, data reliability, and the complexity of ESG ratings. While there is support for EU regulators driving the sustainability agenda, there is also a call for more focused legislation tailored to investor needs.
“This survey of our EU members represents the views of financial professionals across the ecosystem, from large asset owners to boutique asset managers,” said Josina Kamerling, Head of Regulatory Outreach, EMEA at CFA Institute. “One reason we conducted this survey was to understand how our EU members view the current EU regulatory regime, which is meant to support and encourage sustainable investing.”
Key issues identified include the lack of reliable and verifiable data, with 65% of respondents citing this as a major challenge for asset managers under the SFDR. Additionally, 45% of respondents noted that the volume and complexity of ESG information often lead to confusion among retail investors.
Moreover, 32% of respondents expressed difficulty in comparing ESG products due to non-standardized and incomparable disclosures across jurisdictions. The report also highlighted that 37% of respondents believe the EU Taxonomy regulation has been over-engineered, causing confusion among investors and stakeholders.
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To address these concerns, the CFA Institute has recommended that EU regulators continue to lead on sustainability but develop more precise, step-by-step legislation on ESG disclosure requirements. They also suggest providing clear and consistent ESG terminology, addressing data reliability issues, clarifying fund categorization under SFDR, and simplifying ESG ratings and methodologies.
These measures aim to enhance the effectiveness of the EU’s ESG regulatory framework, ensuring it aligns better with the needs of investors and minimizes the risk of greenwashing.
