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How are investors dealing with new regulatory challenges as the shift towards sustainable investing soars?  

The latest Green Bond Pricing in the Primary Market report shows that demand for green debt has been soaring since market inception, with over $1.6tn (£746bn) issued to date and 2022 touted to see the first yearly trillion.

At the same time, disclosure on the sustainability of investment portfolios, which will require financial services firms, companies, and pensions funds to start disclosing their environment impact is bringing new responsibilities and challenges for investors.

The Sustainable Finance Disclosure Regulation (SFDR) in Europe for example brings mandatory Environmental, Social and Governance (ESG) disclosure obligation and firms including fund houses, insurers and pension funds will have to begin disclosing how sustainable they really are.

According to CAMRADATA’s latest whitepaper on Sustainable / Green Bonds, while this seems like a worthy additional purpose for long-term capital, it has come into being rapidly. There is a case for arguing that investors are being asked to make judgements about borrower companies’ sustainability ahead of the company itself.

This latest whitepaper shares views on this issue and other insights from firms including Alliance Bernstein, Amundi Asset Management, Morgan Stanley Investment Management, Aon, LCP, LawDeb and Willis Towers Watson who attended a roundtable hosted by CAMRADATA in March.

The firms discussed key challenges involved including how to report the efficacy of Green Bonds, the need to improve ESG transparency, data quality and reporting standards, and how more education is needed to help clients understand the nuances of sustainability metrics and pathways.

Natasha Silva, Managing Director, Client Relations, CAMRADATA said: “With the sustainability of portfolios very much in focus, fiduciaries now feel the pressure that they have to understand the value of their portfolio in the context of the wider world, not just the retirement plans of their beneficiaries.

“Investing is difficult enough when just considering financial metrics, but the rapidly developing demands to incorporate sustainability are adding even more burden. Our panel of asset owners, asset managers and advisers explored the responsibilities and challenges for investors in this new world of sustainability.”

To read more on Sustainable /Green Bonds, download the whitepaper here.

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