‘What matters to me is market testing’: Allianz’s Hoerter on the need for an evidence-based Action Plan

Responsible Investor’s latest instalment of The EU Action Plan: What Matters To Me

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This is the seventh in RI’s ‘The EU Action Plan: What Matters To Me’ series, providing insights from market experts on the implications of the EU Action Plan on Sustainable Finance. Today, Steffen Hoerter, who heads up ESG at Allianz Global Investors and is a member of the EU’s Technical Expert Group on Sustainable Finance, urges market participants to test-drive the proposals, to help generate concrete findings.

Sustainable investment has come a long way in both sophistication and scale since its early days. The EU Action Plan on sustainable finance is perhaps policymakers’ most advanced initiative so far to drive sustainable and inclusive growth.
The European Commission set up a Technical Expert Group on Sustainable Finance (TEG) that will play a key role in turning this plan into a reality, and the group’s proposals will go to a public consultation this summer. However, even after the new proposals have been adopted and the rule books rewritten, the task of creating a positive environment for sustainable finance is far from complete. It’s the role of the markets and market participants to adopt the plan, test it and promote change where needed.
The importance of the work done at the EU level, as outlined in the plan’s 10 action points, cannot be underestimated. The need to drive change across the ecosystem was also reinforced by a recent World Economic Forum report. Investors and corporates should expect the main changes to come, broadly, via a reinforcement of ESG considerations as part of their fiduciary duties, disclosure requirements and risk mitigation strategies. Each of these pillars is systemically important in contributing to the long-term stability of the financial markets.But to make the EU sustainable finance agenda work, it must be actively tested and adopted by the market, which is seeing a new environment for sustainability taking shape in front of it. The good news is that the EU is being very transparent about the upcoming regulation from the action plan.

“The best way for the EU’s action plan to be implemented is by the market, for the market.”

The question of ‘what matters to me’ is answered by market-testing the regulatory proposals within the EU Sustainable Finance agenda. This evidence-based approach will be helpful in distilling the future steps that the financial industry needs to take. It will also help each market player build the necessary knowledge to adapt most efficiently to the changes that the action plan is likely to bring.
The best way for the EU’s action plan to be implemented is by the market, for the market. In our view, while the EU sets out its ambitions for sustainable finance, the market is responsible for the plan’s adoption and development. Proper testing by market participants will generate real, concrete and technical implications. These are necessary to bring the action plan points to life and transform the plan into relevant and effective regulation that ultimately works for all and achieves the EU’s ambitions.

Steffen Hoerter is Global Head of ESG at Allianz Global Investors and a member of the European Commission’s Technical Expert Group on Sustainable Finance, where he has focused on developing recommendations for ESG disclosure for benchmarks and technical advice on the creation of low-carbon benchmark categories.