EU financial regulators should look into whether the current ESG data provider landscape represents an oligopoly, Robeco’s Chief Investment Officer for Fixed Income and Sustainability, Victor Verberk, has said.
Speaking about the implications of new EU sustainability regulation at the opening of RI’s online European conference this morning, Verbeck said: “If I can give the [EU] regulators a tip, then look at the potential oligopolistic nature of the data suppliers, because there are [just] three of them”.
He joked that “whenever you give them a phone call, you get 100k [added to] your bill”.
It’s not the first time concerns about ESG data providers have been raised with EU regulators. Late last year, France’s Autorité des Marchés Financiers and the Dutch Autoriteit Financiële Markten – two of Europe’s most powerful national securities regulators – put forward proposals for mandatory regulation of all ESG data providers by the European Securities Market Authority (ESMA).
Earlier this year, London-based think tank SustainAbility advised the European Commission to set up a certification and supervisory regime for ESG data and ratings providers, as well as developing industry standards.
In his keynote, Verberk also said that the biggest challenge for ESG data is its backward-looking nature. Forward looking data is the “Holy Grail”, he said, but for now the challenge is using the data that is available effectively.
Speaking about the scale of the challenged faced by investors to meet the raft of new ESG regulation in Europe, Verberk said that around half of Robeco’s team is working in some capacity on meeting the incoming rules, which include the EU Taxonomy and the Sustainable Finance Disclosure Regulation (SFDR). But he complained that guidance from Brussels is lacking:
“[A]ssessing the taxonomy and the impact of SFDR, that’s not easy and there are no helplines,” he said, adding that assurances from policymakers that they won’t use the “axe” – or severe punishment – in the first year of audits do not comfort him.
Verberk described the shifting regulatory landscape in the EU around sustainability as “complex”, “big”, “painful”, “too fast” and “a bit over the top”, but added that it is also “visionary” and “definitely the direction we have to go”.
He said that regulators have underestimated the cost and effort involved in implementing its sustainability programme by a “hundredfold”.