On 20 June 2022, the European Parliament issued an announcement stating that its Economic and Monetary Committee had adopted new rules for long-term investment funds.
Lead MEP, Michiel Hoogeveen has said on the matter, ‘While the legislative framework for European long-term investment funds (ELTIFs) was adopted in 2015, so far their market remains small…The Parliament position voted in ECON today aims at accelerating the uptake of ELTIFs and thus ensuring more financing of long-term projects throughout the Union.’
- With regards to protecting investors: MEPs want the European Securities and Markets Authority (ESMA) to keep and update quarterly a central public register of authorised ELTIFs with updated links to their annual reports and, where available, the key information document, so that investors can analyse and compare existing ELTIFs.
- MEPs have decided that ELTIFs, marketed to retail investors, should be permitted to borrow cash amounting to up to 70% of the net asset value (NAV) of the ELTIF. Retail investors should also be protected from being charged unjustified additional costs and given a clear written alert informing them that investing an amount exceeding 10% of their financial instrument portfolio in ELTIFs could constitute excessive risk taking in case an ELTIF is considered unsuitable for a retail investor.
- MEPs propose removing existing tax barriers and introducing tax incentives, in order to ensure an adequate level playing field across the EU.
Furthermore, with regards to greener investments:
- MEPs want to create an optional sub-category of ELTIFs, marketed as environmentally-suitable to collect capital from investors looking for sustainable investments. Such ELTIFs should be subject to stricter requirements, invest exclusively in assets that meet the taxonomy obligations and disclose what share of their assets complies with these requirements to avoid green washing.
- MEPs believe it necessary to clarify that ELTIFs can also invest in European green bonds. Furthermore, they propose complementing the existing rules so that green bonds and financial products, that aim to make sustainable investments, are explicitly included in the list of investment assets eligible for ELTIFs.
Going forward, the ECON committee negotiators are now ready to start talks with the Council, which has already adopted it position.