A number of studies have been released over the past week suggesting vulnerabilities in ESG funds’ performance and impact claims.
Experts at ratings agency Fitch said they anticipated “risks and potential returns” as a result of diverging regulatory approaches in Europe and the US.
The analyst note contrasts the “conservative stance” of US worker pensions watchdog the Department of Labor to ESG, including recent moves to restrict the ability of workplace pensions to invest in ESG funds and vote on ESG matters, with the ambitious approach of EU regulators.
It warns that EU initiatives such as the reform of Markets in Financial Instruments Directive (MiFID) II rules, could increase compliance costs for asset managers and result in “additional litigation and reputational risk” if financial and ‘non-financial’ targets were not met.
“While these differing approaches are not expected to immediately affect ratings assigned to investment managers…