Greenpeace’s mystery shopping: allegations that cast doubt on Sustainable Finance

At a time when all stakeholders need to step up their efforts in terms of transparency and education to encourage the development of sustainable finance, the ABBL regrets that the report “Impact Investments – an advisory check at Luxembourg banks. Results and implications of a Mystery Shopping” issued by Greenpeace adds further confusion to the debate and undermines public confidence. The survey focuses on impact funds, a niche product that has no regulatory definition, while banks in the financial centre offer numerous investment products that fully comply with the requirements of European regulations on sustainable finance.

Nevertheless, the ABBL and its members take note of the areas for improvement identified in the study in terms of taking sustainability preferences into account. They are doing their utmost to serve the cause of sustainable development by continuing their efforts to train bank advisers and by engaging in European debates in favour of a clearer regulatory framework applicable to products with an environmental and social impact.

Sustainable finance: a major challenge for banks

“In Europe, more than anywhere else, banks will play a decisive role in financing the sustainable transition of our societies,” stresses Ananda Kautz, member of the ABBL’s Executive Committee. “But there are still many challenges facing banks”. These include: the appropriation and implementation in a very short space of time of extremely innovative and wide-ranging regulations – which are still evolving – the difficulty of finding and training experts in the field, the wide range of expectations of retail investors, the hostility of representatives of civil society, and so on.

Lack of a common language

Julien Froumouth, head of sustainable finance at the ABBL, points out that “any initiative that makes it possible to take stock of knowledge and practices in the field of sustainable finance is to be welcomed. What is regrettable, however, is the methodology used in this study, which is not based on the precise definitions of the European regulations currently in place”. The study focuses on impact investment products. This type of product represents only an extremely limited proportion of the sustainable investment universe, has no regulatory definition, and is often reserved for well-informed investors. In the absence of a clear definition and common standards for determining what an impact product is, the challenge for bank advisers to propose a product that corresponds exactly to the expectations of the mystery shoppers could therefore only invariably lead to a dead end and fuel fairly negative survey conclusions.

According to Julien Froumouth, “it is also regrettable that the leaders of the NGO did not wish to accept the hand extended by the ABBL at the end of the previous exercise. We had proposed to develop a common methodology taking into account the regulations in place, the products available and the demands of savers, which would have significantly advanced the debate”. European regulations on sustainable finance are still evolving, particularly in terms of clarifying the categorisation of product offerings.

Ananda Kautz: “The ABBL welcomes initiatives at European level aimed at providing greater clarity, transparency and comfort for investors, and is committed to an active dialogue with the competent authorities”. The association is taking part in the ongoing consultations on the revision of the SFDR regulation, in the discussions on the ESMA guidelines on the naming of investment funds and in its forthcoming report on greenwashing.

Intensive training efforts

The report highlighted areas for improvement in terms of the advice given to customers and, in particular, the documentation provided to assess the product. “We have numerous training initiatives for professionals in the sector,” emphasises Julien Froumouth. The ABBL has developed a training programme with the House of Training, is in the process of finalising a training module on integrating climate and environmental risks into risk management systems, and will be developing ESG banking training modules that will go beyond generic education in sustainable finance by training various business lines in the aspects of the regulations that concern them in particular. These initiatives are in addition to those carried out within the banks themselves or by other institutions such as the Stock Exchange, the CSSF or LSFI.

Sustainable finance has been a priority area of work for the ABBL for many years. Several working groups are active within the ABBL, focusing on the interpretation and application of sustainable finance legislation and the sharing of best practice. Thanks to these areas of work, the association has been able to issue guidelines on the SFDR directive, publish a White Paper on climate and environmental risk management and collaborate with LuxFlag on the introduction of an ESG label for discretionary management mandates.

The ABBL Foundation for Financial Education continues to raise awareness among the general public, notably through workshops with secondary school students.

We will continue our efforts to help bank advisers better grasp the full complexity of sustainable finance and to make them more aware of the need to proactively and systematically raise the issue of sustainability preferences with their clients.