Solving global problems via smarter capital markets toward a more sustainable society
Chapter 29 : Impact Investing and European Wealth Managers: Why Impact Investing Will Go Mainstream and Evolve to Suit European Investors
Trang Fernandez-Leenknecht, CAIA, LLM
Abstract
Capital markets and private market participants have a role to play in solving global challenges. Several countries, European Union (EU) and non-EU Member States, have tackled the topic and addressed the need for capital to be channeled into Impact Investment. However, harmonized, large-scale regulations are necessary for a consistent implementation and diffusion to a mainstream scale of Impact Investing across Europe.
Two approaches can be implemented (i) clients being oriented and advised on a routine basis, if suitable, to Impact Investing, and (ii) wealth managers investing part of the assets under management into Impact Investing. The European Commission´s (EC) Action Plan “Financing Sustainable Growth” aims at integrating Sustainable and Impact Investing at every stage of the wealth management chain. This constitutes a formidable opportunity to leverage and democratize Impact Investing in all European and non-European investors.
With the EC´s Action Plan on Sustainable Finance, financial intermediaries will need to ask every client about their sustainability investing preferences within the framework of the Markets in Financial Instruments Directive II (MiFID II) and the Insurance Distribution Directive (IDD) product suitability assessment. MiFID II and IDD, underpinned by the EC Action Plan, may play a key role in contributing to the European effort of combining “impact at scale” with “capital at scale” by driving more capital towards solutions focused on generating significant positive effects for people and the planet.
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