EU agrees to sustainable investment disclosure framework

The European Parliament and European Union countries agreed Thursday on sustainable investment disclosure rules for institutional investors.

Under the agreed rules, money managers, insurance companies, pension funds and investment advisers are required to integrate environmental, social and governance factors into their portfolios, disclosing in a consistent way how they invest.

In efforts to improve the quality of information supplied to investors, managers, insurers and advisers will now have to inform plan participants and savers how their activities are impacting the environment.

The rules, which are a part of the EU's broader initiative on sustainability, the Sustainable Finance Action Plan, also require information about the adverse impact of investments, including assets that pollute water or damage biodiversity. Money managers, insurers and advisers will be bound by a single disclosure tool box, the EU said.

The availability of information is crucial to the integration of risks related to the impact of ESG events on the value of investments, the EU said.

The regulation also eliminates the possibility to make unsubstantiated or misleading claims, known as green washing, by investment firms about the sustainability focus of investment products they sell to investors.

"The EU is fully committed to implementing the (2015) Paris Agreement and leading the global fight against climate change," said Valdis Dombrovskis, vice president of the European Commission, who is responsible for the euro and social dialogue and is in charge of financial stability, financial services and the Capital Markets Union. "Thanks to today's agreement, we are making sure that the financial system works towards this goal."

Mr. Dombrovskis said in a news release that the new disclosures rules will enable investors to make more informed choices so that their money is invested more responsibly.

Details on when the rules will go into effect could not immediately be learned.