Listing Act deal: A twofold win for investors & the environment

Posted on 05 February 2024

Following extensive negotiations, the Listing Act trilogues concluded on 2 February, reaching a deal that contains specific wins for sustainable finance and investors alike: it improves the sustainability disclosures of stocks and bonds to better inform investors buying them.

WWF celebrates the fact that information on the environmental performance of companies considered for investment will now be included in the prospectus summary. This development enables investors to easily access relevant details and make better-informed decisions. The Listing Act includes amendments to the Prospectus Regulation: this regulation outlines rules for crafting a 'prospectus', a document providing information about stocks and bonds when they are sold to the public. A large majority of retail investors want to invest sustainably (1), but few tend to read the long document, making the existence of a prospectus summary vital.

Mathilde Nonnon, Sustainable Finance Policy Officer said: "WWF believes that integrating information about environmentally sustainable activities into the summary prospectus is a win-win scenario: it sheds light on environmental matters and it also benefits retail investors, empowering them to be better-informed about the sustainability of their investments.”

In addition, WWF welcomes the introduction of a notification designed to inform investors when a company has identified environmental issues as a material risk factor. Notably, investments that are exposed to new fossil fuels activities can increasingly lead to “stranded assets”, making it essential for investors to be duly informed about such risks. WWF recommends taking an additional step by introducing a "Sustainability Alert" mechanism, to warn investors when the investment does not align with the objectives of the Paris Climate Agreement.

This progress sets a precedent for extending the same disclosure to the PRIIPS (Packaged Retail and Insurance-based Investment Products)’ Key Information Document. Currently undergoing revision within the framework of the EU Retail Investment Strategy, the PRIIPS Regulation primarily covers funds. Ensuring consistency with the Prospectus, which addresses stocks and bonds, is pivotal for covering all key financial products and instruments, and for delivering minimum sustainability disclosures to investors across the board. It should be noted that this is not about new disclosure requirements, but simply ensuring consistency with sustainability disclosures that are already required in other EU pieces of legislation and closing a loophole.

Note to editors: 

(1) - Natixis (2016), Mind shift: getting past the screens of responsible investing;

- Schroeders (2017), Global Perspectives on sustainable investing;

- University of Cambridge (2019), “Walking the talk: Understanding consumer demand for sustainable investing”;

- 2° Investing Initiative (2020), “A Large Majority of Retail Clients Want to Invest Sustainably” provides a larger overview

- Maastricht University (2021) “Get Real, Individuals Prefer More Sustainable Investments;

 
Listing Act deal brings the EU one step closer to a sustainable economy.
© Micheile Henderson, Unsplash