Five Things to Know

Sustainable Finance Disclosure Regulation (SFDR)

The Sustainable Finance Disclosure Requirement, or SFDR for short, is a new piece of EU regulation that will require financial services firms with 500 or more employees to report ESG metrics.

Firms need to be thinking about this requirement now, as reporting must start for product-level SFDR disclosure by January 2023 (and at the entity level by June 2023). Legislative measures requiring integration of sustainability factors and sustainability risks into UCITS and AIFMD regimes will apply from 1 August 2022.

There are a list of over 60 indicators that your firm will need to collect across a wide range of ESG factors. Firms will also be responsible for EU Taxonomy disclosures for SFDR Article 8 & 9 funds, EET production and ESG-related changes to MiFID II reporting requirements for product manufacturers and distributors.

This will be a large data management exercise, not just for collecting holdings data across all your funds, but also related to collecting all the relevant data points for each holding. And, because currently no single ESG market data vendor can provide all of the indicators to complete a full disclosure, you will need to subscribe to multiple ESG data vendors, and then pull that information into your final disclosures.

When it comes to ESG, we are focused on improving the quality and comparability of data across sectors and industries. Our platform, which we originally designed to help our clients make more-informed investment and risk-management decisions, can now be leveraged to help you streamline the data collection process and automate the SFDR reporting requirements. Furthermore we are supporting clients by helping them assess and align their portfolios with the EU taxonomy and fulfill reporting requirements.

To get you started, we’ve outlined the five things you need to know about SFDR and more.