ESMA publishes ESG study and looks to consult stakeholders on cross-border marketing under UCITS and AIFMs
24 May 2022 France
Image: metamorworks
The European Securities and Markets Authority (ESMA) has published a study looking at the potential reasons behind the relatively lower ongoing costs, and better performance, of ESG funds compared to other funds, between April 2019 and September 2021.
ESMA recently determined that ESG equity UCITS, excluding exchange-traded funds, were cheaper and better performers in 2019 and 2020, compared to non-ESG peers.
Understanding the cost and performance dynamics of ESG funds is of particular interest as it may bring insights for the overall fund industry on how to make funds more affordable and profitable for retail investors, says the association.
The potential drivers behind this relative cheapness and outperformance is due to ESG funds being more oriented towards large cap stocks with higher orientation towards developed economies. The sectoral exposures also differ between ESG and non-ESG funds, says ESMA.
Even after preparing for these differences, ESG funds remain statistically cheaper and better performing than non-ESG peers, it added.
ESMA also announced it is in the process of consulting stakeholders on the information to be provided, and used by firms, when they inform regulators of their cross-border marketing and management activities under the UCITS Directive and the Alternative Investment Fund Managers Directive (AIFMD).
The purpose of the consultation is to facilitate the process for notifying cross-border marketing and management activities in relation to UCITS and Alternative Investment Funds (AIFs).
This will be achieved by defining harmonised information to be notified to competent authorities, and developing common templates to be used by management companies, UCITS and AIFMs, the association says.
The consultation will be of particular interest to AIFMs, internally managed AIFs, UCITS, management companies, internally managed UCITS, and their trade associations, as well as professional and retail investors investing into UCITS and AIFs and their associations.
The closing date for responses to the consultation is 9 September 2022.
ESMA recently determined that ESG equity UCITS, excluding exchange-traded funds, were cheaper and better performers in 2019 and 2020, compared to non-ESG peers.
Understanding the cost and performance dynamics of ESG funds is of particular interest as it may bring insights for the overall fund industry on how to make funds more affordable and profitable for retail investors, says the association.
The potential drivers behind this relative cheapness and outperformance is due to ESG funds being more oriented towards large cap stocks with higher orientation towards developed economies. The sectoral exposures also differ between ESG and non-ESG funds, says ESMA.
Even after preparing for these differences, ESG funds remain statistically cheaper and better performing than non-ESG peers, it added.
ESMA also announced it is in the process of consulting stakeholders on the information to be provided, and used by firms, when they inform regulators of their cross-border marketing and management activities under the UCITS Directive and the Alternative Investment Fund Managers Directive (AIFMD).
The purpose of the consultation is to facilitate the process for notifying cross-border marketing and management activities in relation to UCITS and Alternative Investment Funds (AIFs).
This will be achieved by defining harmonised information to be notified to competent authorities, and developing common templates to be used by management companies, UCITS and AIFMs, the association says.
The consultation will be of particular interest to AIFMs, internally managed AIFs, UCITS, management companies, internally managed UCITS, and their trade associations, as well as professional and retail investors investing into UCITS and AIFs and their associations.
The closing date for responses to the consultation is 9 September 2022.
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