TISA, a cross-industry financial services membership body, has launched the first Good Practice Guide intended to help firms understand their ESG reporting obligations under Sustainable Finance Disclosure Regulations (SFDR).
TISA, a cross-industry financial services membership body, has launched the first Good Practice Guide intended to help firms understand their ESG reporting obligations under Sustainable Finance Disclosure Regulations (SFDR).
The guide will help ensure that disclosures are consistent, comparable and based on objective data, which will allow consumers to better understand and compare the products they are offered.
The guide uses examples and case studies to illustrate how firms might apply the requirements of the regulations and discusses the regulatory background that firms need to consider, including that of the FCA and Government. It uses the Investment Association’s terminology from its Responsible Investment Framework and discusses the Bridges Spectrum of Capital and analyses and compares the PRI framework. Impact Investing, UN Sustainable Development Goals Sustainability risk versus Adverse Impact, and Active ownership versus Stewardship are also discussed.
Currently, there is no regulatory requirement for financial services firms to ask clients about their preferences in respect of either sustainability or ESG matters, or to incorporate these into the advice given or the way in which a portfolio is managed, however firms are generally aware of the pressure to consider the investor’s investment objectives, which may include preferences on sustainability or ESG topics.
Appropriate disclosures to customers and investors around sustainability, particularly climate change, but also governance and social impact (ESG), will help drive flows from customers and investors, as can be seen from the popularity of explicit ESG funds across Europe and the UK. These flows will influence investors in companies and the companies themselves while also helping consumers understand and compare the products they are offered.
Jeffrey Mushens, Technical Policy Director at TISA, says: “Consumers are increasingly conscientious. They want to know where their money is invested and how ethical and sustainable are the products and services that are offered to them. This guide will ensure that financial services firms are reporting in a clear and consistent manner, which makes comparison simple. There will be increased demand for such transparency so this guide will help firms get ahead.”
Robert Howard, Chair of TISA’s R&SI Policy Group and Senior Manager, Compliance at Charles Stanley, says: “The work that has gone into this report will significantly help firms reach their regulatory requirements by creating a new standard for firms that will ensure reporting is efficient and honest.”
