Finance Firms Risk Clash With Clients Over Sustainability Data

(Bloomberg) -- Europe's financial industry is calling for increased pressure on companies to provide the mountains of data needed to help make more environmentally-responsible investments.

Banks and asset managers want the European Commission to force businesses to report more about the sustainability-related risk they face, according to feedback submitted to the European Union's executive arm. Industry groups representing key parts of the region's economy are pushing back against the idea, seeking to avoid new costs.

The issue is emerging as a new front in the EU's effort to regulate the market for green investments and make the finance industry deal with climate-related risks. Its flagship initiative aims to decide which kind of investments can be defined as sustainable, but there is widespread recognition that the plan won't work without a clearer idea of what companies are doing.

Asset managers and institutional investors will only be able to properly make their investment decisions if sustainability information “is readily available and comparable across different companies and sectors,” the German Investment Funds Association said in response to an EU consultation that closed late last week.

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While Europe's main banking lobby called for more data from small and medium-sized businesses -- the vast majority of companies in the EU -- representatives for the sector strongly pushed back against any stricter requirements.

Tougher rules “would once more create additional costs to SMEs, which usually do not have the expertise to fulfill these types of reporting obligations within the company itself, but would have to pay for external consultants,” according to SMEunited, which represents 24 million small businesses across Europe.

The commission is keeping several options on the table for a review of the reporting rules that may be launched this year. It may stick with a non-binding approach to get companies to disclose more, or it could impose significantly tougher demands.

Schroders Plc also called on the EU to avoid fragmentation by either seeking an international standard or make different frameworks internationally compatible.

To contact the reporter on this story: Alexander Weber in Brussels at aweber45@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Ross Larsen

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