What is sustainable finance? That's a US$4t question for investors

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Major fund managers, including BlackRock Inc and Amundi Asset Management, are running into a roadblock as they seek to put more money into emerging-market sustainable investments: a lack of common global definitions that would make it easier to identify what to buy.

There's a shortfall of as much as US$4 trillion a year in investment needed to help address problems such as climate change, the United Nations estimates. The lack of common standards is one sticking point in filling that gap, money managers say, along with lack of data on carbon emissions and inadequate collaboration between regulators globally.

Many asset managers are shifting towards making sustainability criteria an essential part of their strategies. Challenges abound even without the issues posed by inconsistent global definitions. Disagreements about responsible investing recently led to a walkout of 11 people at NN Investment Partners, a US$313 billion Dutch fund manager.

"Capital needs to reach where it's actually needed," Stanislas Pottier, chief responsible investment officer at Amundi Asset Management, said on the sidelines of a conference in Singapore last week. Big money managers sometimes face difficulties investing in emerging-market assets due to"strict risk profile constraints, a lack of standard definition of green, inadequate data and disclosures".

 

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