November 2021 | Issue 240

CLO managers join forces as they line up behind SFDR

Michelle D'Souza headshot
Michelle D’souza
A plethora of European CLO managers have teamed up with regulatory reporting provider FinDox to form a working group focused on Sustainable Financial Disclosure Regulation (SFDR), sources tell Creditflux. A spokesperson for FinDox declined to comment.
The working group is represented by more than 30 European CLO managers, sources say, and more are likely to join.
AlbaCore, Blackstone, BlackRock, Bridgepoint, Capital Four, Carlyle, CVC, CSAM, Napier Park, HPS, Fair Oaks, PineBridge and Rothschild are understood to be among the managers in the group. It also includes CLO service providers, such as law firm Paul Hastings. This combination paves the way for a united and consistent approach to ESG compliance within the CLO market.
CLO managers are not required to report on SFDR, but EU fund managers that invest in CLOs may be required to provide manager-level reporting on the ‘principal adverse impact’ of their investment funds.
“It has exceeded our expectations in terms of size and time-scale”
Stamatia Hagenstein, Portfolio manager | Lupus Alpha
Creditflux reported in June that CLO investor Lupus Alpha Asset Management was working with CLO syndicates to insert SFDR language into prospectuses.
Sources say the working group, which was formed in June with a handful of firms, aims to help CLO managers implement SFDR reporting technical standards in monthly trustee reports.
El Segundo-based FinDox is said to be working with CLO managers, industry participants and leveraged loan issuers on the data and reporting structures required for SFDR reporting. It aims to collect the required data and embed it into CLO trustee reports.
Stamatia Hagenstein, portfolio manager at Lupus Alpha, says the FinDox working group is a positive development. “We think this is the way that ESG or impact investing should work,” she says. “We hoped we would have an impact for responsible investing in the European CLO market, but obviously this exceeded our expectation in terms of size and time-scale.
“This path wouldn’t have worked if we didn’t get the positive feedback from syndicates and CLO managers. Now it’s up to the issuers to provide the necessary data. All of this, in our view, will help to support the importance of the CLO market as an asset class.”
CLO managers have been looking to comply with Article 8 of SFDR, which requires promotion of aspects of ESG investing. Officials at Fidelity said in September that they were producing what is believed to be the first Article 8-aligned European CLO. And in October, Capital Four’s Torben Skødeberg told listeners to Creditflux’s Last Tranche podcast that his firm was talking to lawyers about producing a similar CLO.
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Global credit funds & CLO's
November 2021 | Issue 240
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