Stricter reporting guidelines round ESG might be on the horizon for European asset managers, fund administrator Ocorian has predicted.
The compliance specialist believes that adjustments shall be made to the Sustainable Finance Disclosure Regulation (SFDR) later this 12 months, which may result in stronger disclosure necessities for asset managers.
Following an evaluation of the prevailing laws, Ocorian mentioned that it expects to see extra taxonomy alignment, the place funding merchandise that are labelled ‘Article 8’ (selling environmental or social traits) or ‘Article 9’ (sustainable funding goal) will probably must show a stronger alignment with the taxonomy.
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The idea of sustainability danger is more likely to obtain extra focus, added Ocorian, whereas extra emphasis could be positioned on disclosures relating to precept antagonistic sustainability impacts.
Ocorian additionally steered that the prevailing SFDR labels (Article 8 and 9) could be revised or supplemented with new classes to supply extra readability and comparability between totally different merchandise. Additional harmonisation between EU and UK regulation can also be anticipated.
“The goal of the unique SFDR…was to supply retail buyers and restricted companions resembling pension funds readability and transparency on the sustainability traits of funding funds marketed to them – thereby tackling greenwashing,” mentioned Hatim Baheranwala, co-founder and chief government of Treety, Ocorian’s ESG reporting associate.
“The chosen strategy was to outline a set of anticipated disclosures and reviews, and never undertake any formal labelling. This has sadly backfired throughout implementation, because the reporting classes resembling Article 6, 8 & 9 have emerged as de facto labels.
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“It’s subsequently a welcome signal that the EU is endeavor this evaluate, and we anticipate the forthcoming amendments to the construction of the SFDR and its associated technical requirements to be introduced quickly.
“We’re additionally urging asset managers to remain one step forward and be ready – whereas the regime is being improved and simplified, by getting into into this evaluate the EU has clearly signalled that its goal is to eradicate loopholes and guarantee standardised sustainability reporting throughout your complete market.”
Baheranwala really useful that each one various asset managers begin by reviewing their present ESG and sustainability reporting processes and take steps to make sure completeness, credibility and effectivity of their reporting flows, similar to they do for his or her monetary disclosures.
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