The imminent implementation of the EU Sustainable Finance Disclosure Regulation (SFDR), the first deadline of which is 10 March 2021, has forced managers to adapt to market developments faster. To add, there is further confusion due to a plethora of ‘soft’ regulation and the decision of the UK to not adopt EU rules. Rules around disclosures, definitions and new taxonomies are difficult to interpret. These require significant changes across the operating model and increased operational burdens. There is greater demand for funds with tangible ESG objectives and measurable impacts, as well as a growing recognition that ESG factors can offer a competitive advantage in the market.Īcross Europe, the industry is grappling with swathes of new regulations and updates to existing obligations. Exclusionary screening is no longer enough to meet investor expectations.

Whilst appetite amongst investors for integrating environmental, social and governance (ESG) considerations in their investment portfolios continues to gain momentum, developments in funds and disclosures are mixed. It will be interesting to see to what extent the publication of the level 2 rules has altered the approach towards product classification and the balance between Article 6 and Article 8 product categories ahead of 10 March. This blog was written before the level 2 rules were issued by the European Commission and whilst the rules have offered a degree of additional clarity, these uncertainties still largely remain.

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