Europe’s ESG regulatory space is dominated by the Sustainable Finance Disclosure Regulation, which requires listed companies in the bloc to declare the sustainability credentials of the funds they manufacture and the assets in which invest.
Its intention is to give investors and advisers a clearer understanding of how sustainable investments are.
Compliance requires the reporting of data that illustrates assets and products’ ESG impacts according to Principal Adverse Indicator (PAI) tests, of which there are 14 mandatory assessments. Among those are greenhouse gas (GHG) intensity, exposure to the fossil fuel sector and gender pay gaps. There are also additional PAIs that markets participants have the option to include in their reports and marketing.
SFDR also prescribes how funds and investment products should be classified in terms of their sustainability, with Article 9 investments having only a sustainable objective, Article 9 products having an objective that recognises sustainability and Article 6 funds that have no stated sustainability objective.
Compliance requires the submission of large volumes of granular data, which many market participants collate within their own systems, while others take advantage of tailored SFDR reporting products. Here are six of the largest providers of reporting products.
MSCI
MSCI’s SFDR Metrics suite offers mandatory and optional PAIs for more than 12,000 issuers and datasets on ESG- and sustainability-focussed funds to manage and report on sustainability adverse impacts of portfolio companies.
Its fund-level metrics classify about 53,000 equity and fixed-income equity and fixed-income mutual and exchange-traded funds.
Index-level metrics enables reporting on adverse impacts for more than 6,000 indexes, while its regulatory reporting and risk analytics provides a self-reporting SFDR solution for the Principal Adverse Sustainability Impact Statement at
entity level. Clients can also access data management and reporting of metrics required for multiple asset classes.
Real assets climate solutions include data and metrics so that real estate investors can examine exposure to PAIs, including fossil fuels and energy-efficient assets
S&P Global Sustainable1
S&P’s SFDR tools enable the required assessments and disclosures of product alignment with mandatory and opt-in Principal Adverse Indicators (PAIs) for more than 20,000 public and private companies across 464 business activities.
They leverage the company’s associated datasets: The EU SFDR Dataset gives company-level indicators using data from both Sustainable1 datasets and external sources, covering more than 20,000 companies and 464 business activities.
The S&P Global SFDR Sustainable Investment Framework helps clients comply with MiFID II and SFDR, determining sustainability of portfolio companies within the definition of the regulation.
S&P Global European ESG Reporting Template (EET) standardises data collection and sharing of ESG data points to enable the exchange of fund-level ESG disclosures across SFDR, EU Taxonomy, MiFID II, and IDD.
Bloomberg
Bloomberg’s array of data and technology can be harnessed alongside its standalone SFDR solution. The company provides coverage for all mandatory PAIs, covering more than 15,500 companies, and 75% of the optional indicators. Kits carbon data encompasses more than 130,000 companies in 140-plus countries.
Enterprise Value including Cash (EVIC) data enables clients to streamline PAI measurement and reporting and its AIM order management tool gives investment cycle analytics so buy-side firms can monitor execution against SFDR requirements.
SFDR data is integrated with Bloomberg’s PORT reporting module and clients can access a Microsoft Power BI template.
Morningstar Sustainalytics
Sustainalytics provides full coverage of all mandatory corporate and sovereign PAIs coverage of 95% of voluntary indicators, drawing on data from 12,500-plus companies across 172 countries. As well, the company provides solutions to identify and manage material ESG risks in line with SFDR requirements.
It also offers fund-level SFDR and PAI solutions and promotes an ESG client advisory service.
LSEG
LSEG’s SFDR Reporting Professional is powered by Clarity AI to provide fundamentals and sovereigns data as well as modelled and controversies data. They cover all mandatory SFDR PAIs and four optional PAIs for more than 50,000 companies. Underlying instrument-level data can also de deployed in rebalancing portfolios and creating risk-management strategies.
ISS ESG
ISS ESG covers all mandatory PAIs for corporate and sovereigns across as many as 8,000 issuers, while its optional PAI data encompasses 5,000 issuers, all across as many as 190 countries and supranational issuers.
Its enhanced climate and social data is pulled from 35,000 issuers for greenhouse gas emissions (GHG) and about 185,000 directorship records for governance data.
ISS ESG supportive datasets include GHG emissions, carbon footprint, biodiversity, emissions to water, hazardous waste ratio, violations of UN Global Compact principles, board gender diversity and exposure to controversial weapons.
The company provides SFDR Annual Average Reports to support Level 1 and Level 2 SFDR compliance obligations at entity and portfolio levels.
Subscribe to our newsletter
