April 2021 | Issue 233
Fund managers brace for EU’s new sustainability regulations
Michelle D'Souza headshot
Michelle D’souza
European fund managers were faced with new environmental, social and corporate governance (ESG) regulations in March, which enhance disclosure requirements around sustainability.
The European Union launched the regulations as part of its sustainable investment framework.
Level 1 of the Sustainable Finance Disclosure Regulation (SFDR), which became effective on 10 March, is aimed at standardising sustainability performance and allowing investors to make informed decisions about sustainable investments.
All funds are required to disclose the likely impact of sustainability risks on their returns. Funds labelled as sustainable have stricter requirements. (Article 8 covers funds that promote environmental or social factors and Article 9 is applicable to funds that have a sustainability objective.)
The EU regulator’s initial plan, however, was to issue a level 2 regulation, which would set out in detail how asset managers should comply with the SFDR.
“Kartesia will include detailed ESG KPIs in all fund quarterly reports”
Coralie De Maesschalck, Head of CSR and ESG | Kartesia
“For one reason or another — maybe the coronavirus pandemic — the level 2 regulation got delayed,” says Julia Vergauwen, managing associate at law firm LinkLaters. “For our asset manager clients, this meant they needed to comply with level 1 of the SFDR without any further specification.”
She says that, in the absence of detailed rules, the asset management industry has interpreted the SFDR based on the regulator’s rationale for the SFDR, the draft level 2 rules and by using common sense.
Coralie De Maesschalck, head of corporate social responsibility (CSR) and ESG at Kartesia, says the firm had been producing an annual CSR brochure to give investors and other stakeholders a clearer picture of ESG activity since 2018. The firm will now start publishing a more complete sustainability report that will include the disclosure requirement.
She adds that, next to the sustainability report that will be publicly available, Kartesia will include detailed ESG key performance indicators in all fund quarterly reports sent to investors. This will ensure regular comparisons are made on the sustainability of the portfolio.
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Global credit funds & CLO's
April 2021
| Issue 233
Published in London & New York.
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