With the European Union’s ambitious sustainable finance agenda, the need for reliable, comprehensive, and standardised sustainability data is more pressing than ever.

The introduction of the EU Taxonomy—a classification system establishing a list of environmentally sustainable economic activities—adds layers of regulatory obligations that many companies are navigating for the first time. However, in their efforts to gather and report the necessary data for EU Taxonomy compliance, both corporates and investors are confronting considerable financial and operational challenges.

The EU Taxonomy, within its broader framework, aims to support the European Green Deal.

It provides a detailed and science-based set of criteria that define which economic activities can be deemed sustainable, covering six environmental objectives (e.g. Climate Change Mitigation).

What are the choices for investors looking to integrate EU Taxonomy data into their reports?

1. Company Disclosures

Investors can utilise Annual Reports and Sustainability Reports, where large EU companies are required to disclose their alignment with the EU Taxonomy. This includes the percentage of revenues, capital expenditure (CapEx), and operational expenditure (OpEx) related to Taxonomy-aligned activities, including specific sub-categories of KPIs. Soon under the Corporate Sustainability Reporting Directive (CSRD), Non-Financial Reporting will provide more granular Taxonomy-aligned information and on a much larger pool of companies.

2. Specialised Data Providers

A few specialised providers are now incorporating EU Taxonomy alignment data within their offerings. These platforms typically extract, aggregate and standardise data, providing detailed output and reports on Taxonomy alignment, of companies, and of investment portfolios. Some specialised EU Taxonomy Services include data focused on percentage and value of Eligibility, Alignment, Alignment to Transitional Activities, and Reported exposure to Nuclear and/or Gas activities.  These services can be particularly helpful for investors who aim to produce regulation compliant reports.

3. European Commission and EU Bodies

The European Commission often publishes guidance and data relevant to the EU Taxonomy, including sector guidelines, technical screening criteria, and transition metrics. The European Environment Agency (EEA) publishes environmental data that aligns with the EU’s sustainability objectives, which can support contextual analysis for Taxonomy alignment, especially for impact and outcome-based reporting. The EU Open Data Portal provides free access to a range of data related to the EU Taxonomy, sustainability metrics, and environmental benchmarks. In addition, certain EU member states offer national databases for environmental and economic data that align with Taxonomy metrics, which can help investors understand regional alignments.

4. Corporate Engagement and Surveys

Engaging directly with companies through surveys or direct requests can provide insights into EU Taxonomy alignment, especially for private or smaller companies that may not disclose full alignment publicly. Organizations like the PRI (Principles for Responsible Investment) and industry-specific working groups sometimes gather and distribute Taxonomy-aligned data, especially where public disclosure is limited.

Using a combination of these resources, investors can gather and incorporate EU Taxonomy data into their sustainability and financial reports, aligning their portfolios with regulatory expectations and improving transparency around their sustainability impact.

This article first appeared on Wealth DFM

The fashion industry is at a turning point, driven by regulatory changes, shifting consumer preferences, and investor pressure to embrace sustainability. The hype of ‘fast fashion’ appears to be slowing down, with many consumers wanting to shop for quality over quantity. But with big brands like Temu and Shein encouraging quick fixes to fashion, the industry still has a long way to go if it is to tackle its sustainability issues.

The industry’s reliance on polyester, linked to microplastics and high carbon emissions, is under scrutiny and the environmental impact of polyester is becoming a financial liability for fast fashion brands, as consumers and investors demand greener alternatives​.

At the same time, consumers are keen to ensure that their items are being manufactured in a sustainable way that does not exploit people or damage the environment. Investors must take heed.

Investor Divestment Trends

Investor needs are changing. Many are actively seeking out more impactful ways of putting their money to use. They are sending a strong market signal by divesting from brands that fail to meet sustainability standards. In August, ASN Impact Investors announced it was pulling out of fast fashion after implementing a new sustainability policy. It sold stakes in 12 companies including fashion brands Asos and H&M which have been accused of partaking in fast fashion.

With ethical investing predicted to hit $50 trillion by 2025^[1],representing more than a third of the total global assets under management^[2], companies that ignore sustainability not only face diminishing investor support but also risk long-term financial instability.

The problem of polyester

The production of polyester textiles alone generated approximately 1.5 trillion pounds of greenhouse gases in 2015. High levels of BPA can be found in polyester clothing and the average polyester product degrades over 200 years, meaning it will clog up landfills for centuries.

Investors have a responsibility to engage with these companies and while some big brands, like H&M, Puma, On Running and Eileen Fisher are already committing to moving away from synthetic material use, the cost of inaction is huge.

(Source: Just fashion Transition 2024, The European House/Ambrosetti)

Consumer Shifts and Brand Accountability:

McKinsey’s State of Fashion report emphasises that consumers are increasingly favouring brands that align with their values on sustainability. Brands that fail to provide transparency on their environmental impact risk losing consumer trust and market share​.

According to Mintel, over half of UK and German consumers regard sustainability as an important purchase factor. While in the states two in three say they pay attention to eco-friendly claims from brands^[3].

While fast fashion faces mounting pressure to address its sustainability shortcomings, luxury brands are increasingly seen as leaders in sustainable innovation. Such brands have greater financial flexibility to invest in long-term, sustainable practices, and are integrating these initiatives into their brand identity.

Regulatory changes

Despite progress, The European House’s Just Fashion Transition 2024 report highlights that the EU fashion sector is unlikely to meet its 2030 decarbonization targets on time. At current rates, the industry will miss these targets by 8 years​.

(Source: Just fashion Transition 2024, The European House/Ambrosetti)

Key challenges include the fragmented nature of supply chains, slow adoption of renewable energy, and inconsistent national policies on emissions reduction. There are many regulatory changes that have already come into place, with more on the way, that impact the way the world consumes fashion.

The Sustainable Productions Regulation (ESPR) for example which was enforced by the EU this year ensures brands are transparent with the kind of ethical impact their products are having, including energy consumption, use of recycled materials and emissions.

In the next few years, it will be mandatory for firms to comply with these rules and any that don’t could face scrutiny.

European regulations like the EU Taxonomy and Corporate Sustainability Reporting Directive (CSRD) are also driving change, ensuring companies report on sustainability practices, or risk financial penalties and reputational damage.

In 2025, the UK will adopt the International Sustainability Standard Board’s disclosures, meaning companies will need to report any sustainability risks caused by the materials they use. The Green Claims Directive and Empowering Consumers to Green Transition Directive are further tightening rules around environmental claims, curbing greenwashing and ensuring brands back their sustainability statements with verifiable evidence​.

There’s also The Fashion Pact, which was set up by French President Emmanual Macron, focusing on combating climate change, biodiversity loss, and ocean protection, brings together brands across the spectrum. The Unlock program, a key initiative, connects brands with suppliers of sustainable materials, promoting a transition away from polyester​. For example, the Fashion Pact initiative has defined the following goals:

– Eliminating problematic and unnecessary plastic in B2C packaging by 2025 and B2B by 2030;

– Ensuring at least half of all plastic packaging is 100% recycled content, by 2025 for B2C and by 2030 for B2B

Conclusion: Sustainability as Financial Viability

The industry’s financial health now depends on embracing sustainability, with both fast fashion and luxury sectors undergoing transformations ​ to respond to consumer demands and regulation constraints. While some initiatives are in place, the sector needs to speed up to meet the 2030 pre-defined targets.

Investors have a duty to take action to invest in companies seeking to do good and moving away from unethical practices. Or they can act by supporting brands to move into a more sustainable market, which will inevitably be the long-term beneficiaries.

[1] Bloomberg – https://sponsored.bloomberg.com/article/mubadala/the-future-of-esg-Investing

[2] Times Money Mentor – https://www.thetimes.com/money-mentor/investment-

strategies/ethical-investing#:~:text=According%20to%20data%20from%20Bloomberg,ethical%20label%20of%20some%20kind.

[3] https://www.mintel.com/insights/retail/the-growth-of-circular-and-sustainable-fashion-trends/#:~:text=Over%20half%20of%20UK%20and,claims%20when%20buying%20fashion%20items.

This article first appeared on PA Future 

Este mes de noviembre, la European Securities and Markets Authority (ESMA) introduce nuevas directrices con el afán de reforzar la transparencia en los fondos de inversión sostenible.

Estas directrices, que establecerán estándares más estrictos, requieren que las gestoras justifiquen adecuadamente sus afirmaciones sobre sostenibilidad en el nombre de sus fondos. Y entendemos que esto es relevante, ya que según un estudio realizado por MainStreet Partners, en el que hemos analizado más de 7.000 fondos, descubrimos que aproximadamente 1.800, es decir, el 25% de éstos, se verían afectados por las nuevas normativas de ESMA.

Uno de los problemas más importantes, si no el principal, que se trata de abordar con esta normativa es el relativo al greenwashing, o lo que es lo mismo, la práctica de promover, de manera engañosa, productos catalogados como sostenibles y respetuosos con el medioambiente sin que necesariamente lo sean. ESMA ha optado, de cara a proteger a los inversores, por incorporar unas directrices que proporcionen mayor transparencia, rigor y claridad a la hora de nombrar los fondos de inversión sostenibles. En la práctica se va a exigir a las gestoras que sus fondos que utilicen términos relativos a sostenibilidad en sus nombres aseguren que al menos el 80% de sus inversiones tengan características medioambientales o sociales, y que inviertan en activos sostenibles de forma significativa.

Esto significa que los fondos que incluyan términos como « impacto », « medioambiental », “ESG” o « sostenibilidad » van a tener que adoptar las mismas exclusiones que unos índices de referencia alineados al Acuerdo de Paris (que incluyen, por ejemplo, empresas involucradas en el cultivo y producción de tabaco, empresas con ingresos del 10% o superiores derivados de actividades relacionadas con combustibles fósiles y aquellas empresas que no cumplan el Pacto Mundial de la ONU o los Principios de la OECD).

Y, como comentábamos con anterioridad, aunque la cantidad actual de fondos afectados en cuanto al nombre se refiere es relevante (aproximadamente el 25%), el porcentaje de activos bajo gestión impactados por las exclusiones en estos fondos es relativamente bajo. Por ello, entendemos que lo más probable es que los gestores de estos fondos afectados busquen liquidar sus participaciones en aquellas empresas que no cumplan con las exclusiones ; sin embargo, una cantidad reducida de gestores optaría por cambiar el nombre de sus fondos afectados.

La implementación de estas directrices supondrá, sin duda, retos para algunas gestoras de fondos, ya que adaptarse a ellas pueden suponer tanto el necesitar acceso a información robusta y actualizada, como tener que realizar potenciales cambios en sistemas de reporte. En un contexto donde la demanda de transparencia y responsabilidad por parte de los inversores sigue aumentando, la implementación y cumplimiento de estas directrices será relevante, ya que, desde el punto de vista reputacional, aquellos fondos catalogados como sostenibles que no se ajusten adecuadamente a las nuevas directrices de ESMA, y, por lo tanto, se expongan a potencial riesgo de greenwashing, podrían enfrentarse a cierta pérdida de confianza por parte de los inversores ; mientras que, por otra parte, aquellas gestoras que se adapten con éxito a ellas y demuestren un fuerte compromiso con la transparencia en lo que a inversión sostenible se refiere podrían ver una mejora en su reputación a medio y largo plazo.

Los tiempos para adaptarse a las directrices son ambiciosos, pero posibles de cumplir para aquellas gestoras de fondos que ya tienen una estructura ESG robusta. Específicamente, los fondos existentes antes del 21 de noviembre de 2024 tendrán hasta el 21 de mayo de 2025, mientras que los de nueva creación (a partir del 21 de noviembre de 2024) deberán hacerlo de manera inmediata.

En resumen, las nuevas directrices de ESMA son, sin duda, un paso hacia adelante en lo que a transparencia se refiere, ya que exige a las gestoras que proporcionen una definición más clara y consistente de sus estrategias de inversión sostenible y que esto se refleje en el nombre de sus fondos ; incrementando la protección de los inversores. Sin embargo, aunque sea un paso importante hacia ello, una normativa por sí sola no resolverá el problema del riesgo de greenwashing y será crucial un ejercicio conjunto de todos los jugadores del mercado para conseguirlo.

Este articulo apareció por primera vez en Diario Responsable