The EU Sustainable Finance Disclosure Regulation will come into effect on March 10th, 2021, affecting all EU financial market participants and financial advisers. The rules aim to improve consistency and strengthen existing policies on sustainability risks with broad disclosure requirements covering remuneration and risk policies, investment and internal processes and systems and general product governance. Here our ESG team consider what market participants and advisers need to understand and prepare for.
What should market participants and advisers expect?
The changes will take effect at both an entity and a product level, with a series of actions required over the next two years. While presenting the central legislative deadlines below, some jurisdictions have set alternative dates to either accelerate compliance or to ease the introduction of the regulations more gradually, so it is imperative that asset managers comply with the locally defined timetable. If unsure, you should consult with ESG specialists in your local jurisdictions.
Entity Actions
- March 10, 2021 – entities must publish information on their sustainability policies and assessment of sustainability risks on investment decisions; disclose impacts on sustainability of strategic decisions (comply or explain); reveal how remuneration policies are consistent with sustainability principles.
- June 30, 2021 – due diligence practices become mandatory for entities with >500 employees.
- June 30, 2022 – first quantitative report to be published covering 32 mandatory ESG metrics, with a further 18 being optional.
All of the above information must be made public and be published on corporate websites.
Product Actions must be disclosed pre-contractually
- March 10, 2021 - disclose impacts on sustainability of strategic product investment decisions (comply or explain); explain how products with ESG characteristics or objectives meet those goals (also to be published on the corporate website)
- June 30, 2021 – compliance becomes mandatory for entities with >500 employees
- January 1, 2022 – must ensure that any periodic reporting does not contradict other disclosures
- December 30, 2022 – a description of the adverse impacts of product investment decisions must be produced
Technology can aid compliance
It is a not a trivial task for participants and advisers to keep a check on the compliance of invested companies with sustainability and ESG factors that drive the ESG metrics that must be maintained. One solution is to seek a tailored service that can provide you with the technology and advice to assess your sustainability strategy at the entity and product level, quickly identifying any gaps to industry and regulatory standards to ensure continued compliance.
You should also seek a solution that aids the collection of the mandatory, and optional, data needed to monitor and manage investment decisions to remain compliant, which requires continuous tracking of performance over time.
How can we help?
We have an entire division dedicated to ESG with expert knowledge of the impending EU Sustainable Finance Disclosure Regulation and with local knowledge of its implementation. Our Invest Check service is tailored to meet your individual needs to ease collection of all key data to drive your ESG investment strategy and reduce the stress of remaining compliant with global requirements as they continue to evolve. Our service ticks all the boxes at both an entity and product level to keep you on track.
Contact us now to learn more about what we can offer you.
