EXHIBIT 1 Assessing EU's Sustainability Goals Here are the strengths and weaknesses of three regulatory approaches the EU plans to leverage to achieve its goals in sustainable finance. Goal Disclosure Requirements Suitability Standards Fiduciary Duties Reorient capital flows toward a more sustainable economy. Not coercive enough on their own but essential for other approaches to work and to achieve overall goals. Much more coercive and likely to induce investors to choose sustainable products but may be difficult to discern specific preferences. Could nudge asset managers to direct more capital to sustainable investments and nudge publicly traded companies to focus on sustainability. Mainstream sustainability in risk management. Necessary but not sufficient; people are free to ignore these risks. Clear and consistent labeling for retail products may go further than arcane disclosures in prospectuses. This approach is aimed much more at ordinary investors rather than at asset managers or corporate decision-makers. The regulations will force asset managers to comply, but they could end up greenwashing their process by claiming they incorporate sustainability factors. Foster transparency and long-termism. Can help bring transparency if they are well-calibrated and comparable. See above. Should asset managers take this seriously, it would force public companies to take a long-term view to be attractive investments. Source: Morningstar. EXHIBIT 2 Green Initiatives To advance its sustainability investment goals, the EU is making innovative proposals by relying on the traditional regulatory approach of disclosure. Disclosure Requirements EU Proposal Status of Implementation Establish a taxonomy of environmentally sustainable activities. Political agreement reached at the end of 2019. Detailed screening requirements for climate objectives due end of 2020. Establish standards and labels for green products. Green bond standard drafted; draft recommendations for adding labels to standard disclosures for retail investment products. Incorporate sustainability when providing financial advice. European Securities and Markets Authority has produced draft guidelines to further refine proposal. Develop sustainability benchmarks. Regulation entered into force in December. Integrate sustainability into credit ratings. ESMA published guidelines on sustainability disclosures; no explicit proposal to require incorporating sustainability factors into ratings. Clarify duties of institutional investors and asset managers. Agreement on new legislation, with passage and delegated acts expected in 2020. Strengthen corporate sustainability disclosures. Nonbinding climate reporting guidelines issued in June, supplementing the 2017 Non-Financial Reporting Directive. Suitability Standards Fiduciary Duties Source: Morningstar. morningstar.com/lp/magazine 15http://www.morningstar.com/lp/magazine