September 11, 2020 – The implementation of the EU regulation on the disclosure of standardised sustainability indicators for financial investments is progressing rapidly.

The transparency requirements of the Sustainable Finance Disclosure Regulation (SFDR) affect asset managers as well as insurance companies and banks with portfolio management. Accordingly, financial products are to be divided into three ESG classifications in the future:

  1. financial products with environmental or social characteristics (light green)
  2. sustainable financial products with a desired sustainability impact (dark green)
  3. other financial products

The respective classification of a financial product has to be disclosed in the MiFID II and IDD reporting. Exact specifications for taxonomy and reporting will be available with the final Level 2 drafts by January 2021.

Regardless of whether ESG reporting obligations are effective on March 10, 2021 as planned or will bepostponed until January 1, 2022, organizational and technical measures should be initiated immediately. Delayed implementation can have significant negative consequences.

To ensure that your SFDR introduction runs as efficiently and smoothly as possible, we have created a roadmap for fund companies and insurance companies


a) detailed planning of the ESG rating

  • Investigation of the current degree of coverage of ESG ratings for the current fund portfolio
  • Selection of a EU-conform transition method if the (target) funds use different ESG data suppliers
  • Analysis and selection of an ESG service provider for own liquid investments or for funds that do not provide ESG data
  • Data provision and selection of a rating method for illiquid products; e.g. real estates, investments in renewable energies, private equity
  • Definition of sales processes and data flows
  • Coordination of the effects on investment decisions (return vs. risk vs. ESG)

b) Development of the technical infrastructure as part of a central reporting solution

  • General decision: Build or Buy?
  • Building a database for the company, investment and rating data as well as all ESG reports (e.g. in EMT, TPT, QRTs, KID)
  • Selection of standards e.g. TPT, EMT, EPT for liquid products, gif-IDA for real estate
  • Provision of additional fields and reports for EMTs, TPTs, QRTs, KIDs, brochures and fact sheets
  • Integration with ESG rating agencies
  • ESG assessments for illiquid products
  • ESG reconciliations
  • Adaptation of the distribution systemand the query specifications
  • Adaptation of investment and portfolio systems; integration of external advisors/portfolio managers

c) Challenges and uncertainties to be considered

  • Possible adaptation of the 32 mandatory indicators (ESG taxonomy) also for the providers
  • Restrictions in product selection (funds with EU eco-label are rare)
  • Not enough companies that report on sustainable activities
  • different requirements for sustainable real estate (new buildings vs. existing buildings)
  • No open access to ESG reports of the companies
  • missing standards forEMTs, TPTs/QRTs, KIDs, real estate data
  • Effects on portfolio management
  • Consideration or determination of ESG data for non-European portfolios and investments

As you can see, the list is quite long and should therefore be worked onquickly. ESG reporting should not be introduced as an isolated solution, but rather in an organisational and technical combination with, for example, Solvency II, MiFID II and PRIIPs reporting. Since the source data and processing logic are similar, a platform solution – e.g. arep from acarda – is highly recommended for all regulatory reports.

Benefit of our expertise and our cooperation partners; either as a fully managed ESG service or with the arep solution for generating ESG data. We would be happy to send you detailed documentation and present you the various options.