The keys for keeping pace with the new ESG regulations

A few weeks ago saw the commemoration of Earth Day, an opportunity to promote sustainable attitudes in daily life and raise awareness among the population about the importance of protecting our environment for future generations. Despite society facing a progressively more inevitable climate change, in recent years, the occasion has been used to encourage people to become more sustainable in the decisions they take. A recent YouGov survey concluded that half of Spaniards (57%) rate their daily lives as “sustainable”, although they also believe that they could be doing more. In contrast, 17% believe that they are not sustainable, although they recognize that they would like to do their part.

This growing trend has also been reflected in the finance world: mutual funds and managers are gradually making progress toward sustainable products, combined with greater demand (both by institutional and individual investors) for assets linked to ESG criteria. This type of product is being guided by the new SFDR regulation (EU Sustainable Finance Disclosure Regulation) which, in addition to enhancing transparency, is affecting the performance of the markets (whether obtaining protection of the financial system against sustainability risks or channeling funding towards sustainable activities).

The aim of the new regulatory backdrop is therefore to standardize what is considered sustainable. “It is helping to organize the sector”: was one of the conclusions taken from Aseafi Green Evolution on financial advice, at which Eduardo Ripollés, Director of institutional business and sales at MAPFRE AM was present. The catalyzing effect of SFDR has meant that there has been a greater proliferation of products associated with articles 8 and 9 of the regulation in Spain (products that are firmly committed to sustainability).

Compared to the boom in supply (and the fear of falling into the trap of greenwashing), Eduardo Ripollés asserts that “MAPFRE has approached the world of sustainability in a prudent manner”. “To this end, we have taken a slower, more structured path, prioritizing quality over quantity”, adds the asset management expert.

The importance of financial education

Eduardo Ripollés acknowledges the huge informative and regulatory avalanche consuming the sector as a result of the new regulations, and as a result “consultants play a catalyzing role” when it comes to this information: “The market is growing while the new regulation and ultimate message must be about confidence”.

This approach requires training that makes it possible to explain the makeup of ESG products to investors in a more simple way. “We have to educate investors about the duality of financial and non-financial returns. As an insurance company, we have to be consistent with our eco-social footprint, placing an emphasis on the “S” in Social”, he explains.

This relationship between the professional and the investor has once again placed the importance of financial education in the spotlight. “Sustainability is a recent arrival in Spain; if we skip steps, we are going to generate a lack of confidence in the product”, he asserts.

The ESG criteria, until now, have adapted to new scenarios. Such is the case that the finance sector itself has followed the new regulation in the creation of products that adhere to the principles defined by the European regulation. For MAPFRE, this is nothing new. The insurance group started its journey a number of years ago with funds committed to E (environmental) and S (social).

This is the case of MAPFRE AM Capital Responsable, which covers the principles set out in the environmental impact policies. The mixed fund places a focus on promoting companies and entities that employ sustainable criteria, under the assumption that they offer a better risk-return profile. Furthermore, it aims to raise awareness of the importance of including environmental criteria in the decision-making process of companies, prioritizing those that include it in their corporate governance.

The social aspect is covered by MAPFRE AM Inclusión Responsable, a qualified investment product with a social impact that, as part of an innovative methodology (developed by MAPFRE and La Financiére Responsable), selects companies committed to including those with a disability in the workplace.