“We would argue that this would contravene the EU’s objective of spurring on sustainable investments, without any analysis or reasoning behind such a move.”The legislation should take into account the wide range of approaches used by asset managers to achieve institutional and individual asset owners’ objectives, it added. Sustainable finance proposals tabled by the European Commission could sideline many popular ESG strategies or approaches, investors have warned.The comments were made in feedback on the sustainable finance legislative proposals announced by the Commission in May. The window for feedback closes this week, and submissions have been coming in thick and fast in recent days. The Commission proposed a regulation on reporting requirements related to “sustainable investments and sustainability risks”, but the European Fund and Asset Management Association (EFAMA) said that, as currently drafted, the proposal seemed to equate sustainable investments with impact and thematic investing.“Unless this drafting is changed, this would mean that a large majority of investment approaches and products that today are adopted as ‘sustainable’ on objective and legitimate grounds may no longer be considered so,” the industry association stated. The European Commission announced three legislative proposals on ‘susainable finance’ at the end of MayAccording to UK insurance group Aviva, the way the Commission’s proposed regulation on disclosures was worded “might discourage sustainable investment through proactive stewardship of investments to promote sustainability, for example through company engagement and voting”.It added: “The current wording may also not allow other strategies to integrate ESG factors, for example the integration of ESG risks and opportunities throughout a firm’s investment analysis, or screening out certain types of investments.”It suggested a rewording of the relevant text in the proposed regulation to accommodate not only investments in an economic activity contributing to an environmental, social or corporate governance objective, but “actions in relation to” such activity.This would also align the wording more closely with the approach to integrating sustainability in IORP II, the revised EU pension fund directive, Aviva argued.Taxonomy proposal aim ‘unclear’Investors also expressed concerns about the Commission’s definitions in feedback relating to its proposed system for determining the extent to which a given economic activity is environmentally sustainable. This is also known as the taxonomy proposal and is central to the Commission’s overall plan.The Association of the Luxembourg Fund Industry said it was not clear whether the aim was to establish a framework for “a niche” of investment activity – those marketed as sustainable investments or impact investments – or for the purpose of encouraging sustainable investments overall, whether marketed as such or not.Europe’s largest asset manager, Amundi, said the taxonomy should serve investors’ “wide and diverse” needs, rather than restrict them.