German financial regulator BaFin has launched a consultation on proposed guidelines for sustainable funds, in an effort to “protect investors from greenwashing”.
Thorsten Pötzsch, BaFin’s Executive Director in charge of securities supervision and asset management, said that “where it says ESG on the outside, there must also be sustainability on the inside”.
Under the proposed guidelines, a fund would be considered sustainable if at least 75% of its assets were invested sustainably, it pursued a sustainable investment strategy such as best-in-class, or it tracked an ESG index.
In order to be considered sustainable, an asset must make a “substantial” positive contribution to social and environmental goals. Nuclear energy, shale oil and oil sands are excluded, as are issuers with more than 10% of revenues from fossil fuel usage or energy generation, or 5% from coal or oil extraction.
Green bonds are included as sustainable assets, but the fu…