Asset Management

The EU action plan – greater transparency in the area of sustainable investments

Sustainable Investing

The European Union action plan (see chart 1) is intended to pave the way for a climate-neutral Europe and has the potential to significantly influence business activities and investment decisions. In the first part of our two-part series, we explained the taxonomy (eco-labeling of investment products). This second part details how the two other pillars, “Disclosure” and “Benchmark”, could be beneficial to investors.



  • The EU action plan launched two years ago aims to achieve sustainable growth through a comprehensive package of measures.
  • The disclosure-related topics under the heading of “Housekeeping” are important for institutional investors, as is the disclosure of sustainability aspects for benchmark indices.
  • In the future, clients are likely to benefit from the increased disclosure of sustainability topics and corresponding investment advice. In addition, they are likely to have an improved understanding of risk management that also takes into account sustainability information.
  • We highlight the main features of the disclosure requirements set out in the EU action plan, from investment advice through to product reporting.

Right decisions need the right information: The disclosure requirements at a glance

A Vontobel survey in fall 2019 found that interest in sustainable investments remains high, but there is a lack of comparable information. The measures set out in the EU plan of action are intended to improve matters.

In terms of the second pillar of the plan, this means that, at a company level, asset managers and advisers must now declare whether and how  they take sustainability factors and risks into account in their activity with regard to their business as a whole, regardless of whether they offer sustainable products. If they do not take such factors and risks into account, they must explain why not.

At a product level, they must describe whether and, if so, how sustainability risks are taken into account, regardless of whether the respective products are sustainable.

For products that are marketed as sustainable, they must also declare the corresponding objectives and criteria.

This information must be disclosed on the relevant websites, e.g. by publishing corresponding investment guidelines, and in the marketing and product documentation.

Sustainability in investment advice

Alongside the disclosure requirements described above, the EU is expanding the existing MiFID II directive: Investment advisers must explain sustainability risks (often also referred to as ESG risks) to their clients and record their sustainability preferences. This should form part of a structured and documented advisory process.

Integration of sustainability/ESG risks in risk management

One of the key elements of this EU legislation relates to handling ESG risks. On the one hand, the responsible officers should identify, evaluate and, where possible, avoid sustainability risks at an operational level. This should be monitored by company management. On the other hand, these risks should also be included in portfolio management in the monitoring of the investments made.

Corporate governance

Generally speaking, companies should address the topic of sustainability at the highest level (board of directors and management) in the future. Corresponding targets that can be reviewed regularly should be included in the corporate strategy.

It should also be ensured that sustainability aspects are integrated into the product design and approval process.

Benefits of the disclosure measures for clients

  • Clients and their advisers develop a common understanding of sustainability-related risks
  • Clients are given more precise recommendations as a result
  • Clients understand the characteristics of the respective products, allowing them to make better investment decisions
  • Clients can get a clearer impression of how seriously their financial service provider takes the topic of sustainability

Benchmark indices and reporting

The third pillar of the plan (see chart 1) relates to benchmarks. Specific benchmark indices currently give investors the option of contributing to the objectives of the Paris Climate Agreement or supporting the transition to a low-carbon, climate-change resistant, resource-efficient circular economy, for example. The EU has now set out the corresponding criteria and disclosure requirements for the providers of these indices. The same applies to providers of ESG benchmarks. Over time, the market will benefit from the increased quantity and quality of sustainability data.

This will make it easier to report on the performance of investment strategies in terms of ESG risks and sustainability targets (e.g. carbon footprint) in regular product reports.

Benefits of the measures for clients

  • Improved comparability of the various ESG reference indices and products thanks to standardized disclosure requirements
  • Growing number of sustainability reports provides information on performance promise achievement by the respective investment manager

What is the current state of play?

Most of the legislation discussed above has now been adopted. The consultation process on the technical specifications for the individual requirements (e.g. disclosure) is currently in progress. The European financial supervisory authorities published their first proposals in late April and consultation will continue until the end of this year.

Where does Vontobel stand today?

As an active asset manager, we develop specialized ESG strategies that take into account a wide range of client requirements in a targeted manner.

We will continue to support our clients on the way to greater sustainability thanks to the EU action plan while exceeding the minimum requirements of the EU regulation as a whole.

Our clients benefit from the fact that we already take sustainability risks into account in many portfolios, and we intend to do this as standard for the vast majority of our investment products.

However, we will refrain from pursuing a “one-size-fits-all” approach, because there are simply too many different investment styles, investor objectives, regions, and asset classes.

In addition, we already offer various investment solutions that pursue even more extensive sustainability targets. We will continue to enhance and appropriately extend this product range in order to allow investors to drive positive change through ESG.