Regulating the asset management industry to ensure it increases its investments in sustainable finance would not work and it is up to the industry to set its own guidelines, according to the CEO of Nordea Asset Management.
The EU has put forward a set of legislative proposals that would require institutional investors and asset managers to integrate sustainability considerations into their investment decision-making process, but Nils Bolmstrand told a March 22 conference in Brussels that regulation was not the right direction to take.
"I think that it would be a mistake to stifle that debate by rigid legislation that runs the risk of making it into a tick-the-box exercise instead of being a dynamic business-led development," he said. "When we get regulation, we in the industry get nervous, so we do a tick-the-box exercise and say yes, we looked at that."
The EU is looking at ways to make reporting of sustainable investing mandatory, but Bolmstrand said the industry has to better understand risks and needs to set its own guidelines once it is clear on what those risks are.
"If we are report on something we need to understand and we need to have data on what it is we are going to report on. That is where it has to start, and that will also improve the decision-making and the investment decisions of asset managers. If we can get comprehensive and standardized data, that would help us."
Data had to be developed within the industry to ensure it was "investment friendly," he added.
Strict measurements and standardization on how asset managers should increase their sustainable investments would not work and would not help to make the EU more sustainable, according to Bolmstrand.
Lack of data
Arguing that it was up to the asset management business to set its own guidelines and to drive the changes that it needs to make to ensure that investment becomes more sustainable, he added that the industry needs more reliable information and data on companies to know whether an investment was definitely sustainable or not.
"We do not have, today, comprehensive, reliable and standardized data that allows us to make informed decisions within the asset management industry," Bolmstrand said.
He added that Nordea already discloses how sustainable its investments are and that the industry globally was looking at the best ways to increase sustainable investments.