New ESG Rules Spark Debate in Europe In May, th
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Posted On: 06/26/2024 5:15:14 PM
New ESG Rules Spark Debate in Europe
In May, the European Securities and Markets Authority announced new regulations to address confusion and contradictions on sustainable investing. This move calls attention to the debate over whether stocks from fossil-fuel companies should be included in environmental, social and governance (ESG) funds.
It also tightens regulations on sustainable investing and puts more than one-half of ESG funds in Europe on notice, prompting some fuds to change their names to accurately reflect their holdings or sell off billions in assets.
The new rules create a framework for asset managers to use when naming their investment funds, which each term used being issued with a list of incompatible practices and industries.
If all funds on the chopping block kept their current names, the sectors that would be greatly affected by potential divestments include basic materials, industrials and energy. This is primarily because funds with SRI or ESG monikers will no longer carry companies that generate considerable revenue from coal or oil and gas industries.
The terms “sustainability,” “environmental” or “impact” will also not be compatible with these investments. The rules do allow asset managers to trade with oil and gas companies in transition funds, as long as they show that they are on a path to environmental and social transition.
One major oil and gas company, TotalEnergies, is at risk of losing its ESG designation. To retain its status, the 356 funds holding the company would need to divest more than $3 billion, which equates to 2% of the company’s market capitalization.
Overall, 60 companies in the United States, one-half of which are producers of oil and gas, will be excluded from ESG funds. Well-known companies held in different ESG funds in the European Union include BP, ExxonMobil and Shell.
Under the new rules, impact fund managers will also need to make certain that their investments advance social or environmental objectives. This includes activities to produce clean energy and fuels, or strengthen carbon sinks. Similarly, managers of sustainability funds can invest in companies that meet sustainability benchmarks under the European Union. This includes projects that tackle inequality or decrease greenhouse-gas emissions or water use.
It is important to note that both of the above categories exclude oil, coal, high-emission electricity production and gaseous fuels.
Under the new rules, managers can use the term “transition” to name their funds, as long as they meet the benchmarks. Firms excluded under this are weapon and tobacco companies, with the body noting that transition activities are ones with low-carbon alternatives that minimize emissions.
For investors uncertain about the likely long-term impact of the rule changes in the EU, stocks in entities such as First Tellurium Corp. (CSE: FTEL) (OTCQB: FSTTF) could be a viable option for those wishing to put their investment money in entities that espouse ESG principles.
NOTE TO INVESTORS: The latest news and updates relating to First Tellurium Corp. (CSE: FTEL) (OTCQB: FSTTF) are available in the company’s newsroom at https://ibn.fm/FSTTF
Please see full terms of use and disclaimers on the ESGWireNews website applicable to all content provided by ESG, wherever published or re-published: https://www.ESGWireNews.com/Disclaimer
In May, the European Securities and Markets Authority announced new regulations to address confusion and contradictions on sustainable investing. This move calls attention to the debate over whether stocks from fossil-fuel companies should be included in environmental, social and governance (ESG) funds.
It also tightens regulations on sustainable investing and puts more than one-half of ESG funds in Europe on notice, prompting some fuds to change their names to accurately reflect their holdings or sell off billions in assets.
The new rules create a framework for asset managers to use when naming their investment funds, which each term used being issued with a list of incompatible practices and industries.
If all funds on the chopping block kept their current names, the sectors that would be greatly affected by potential divestments include basic materials, industrials and energy. This is primarily because funds with SRI or ESG monikers will no longer carry companies that generate considerable revenue from coal or oil and gas industries.
The terms “sustainability,” “environmental” or “impact” will also not be compatible with these investments. The rules do allow asset managers to trade with oil and gas companies in transition funds, as long as they show that they are on a path to environmental and social transition.
One major oil and gas company, TotalEnergies, is at risk of losing its ESG designation. To retain its status, the 356 funds holding the company would need to divest more than $3 billion, which equates to 2% of the company’s market capitalization.
Overall, 60 companies in the United States, one-half of which are producers of oil and gas, will be excluded from ESG funds. Well-known companies held in different ESG funds in the European Union include BP, ExxonMobil and Shell.
Under the new rules, impact fund managers will also need to make certain that their investments advance social or environmental objectives. This includes activities to produce clean energy and fuels, or strengthen carbon sinks. Similarly, managers of sustainability funds can invest in companies that meet sustainability benchmarks under the European Union. This includes projects that tackle inequality or decrease greenhouse-gas emissions or water use.
It is important to note that both of the above categories exclude oil, coal, high-emission electricity production and gaseous fuels.
Under the new rules, managers can use the term “transition” to name their funds, as long as they meet the benchmarks. Firms excluded under this are weapon and tobacco companies, with the body noting that transition activities are ones with low-carbon alternatives that minimize emissions.
For investors uncertain about the likely long-term impact of the rule changes in the EU, stocks in entities such as First Tellurium Corp. (CSE: FTEL) (OTCQB: FSTTF) could be a viable option for those wishing to put their investment money in entities that espouse ESG principles.
NOTE TO INVESTORS: The latest news and updates relating to First Tellurium Corp. (CSE: FTEL) (OTCQB: FSTTF) are available in the company’s newsroom at https://ibn.fm/FSTTF
Please see full terms of use and disclaimers on the ESGWireNews website applicable to all content provided by ESG, wherever published or re-published: https://www.ESGWireNews.com/Disclaimer
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