An automated portfolio set up in order to report capabilities to its EU Regulatory Solutions suite has been announced by the Institutional Shareholder Services’ (ISS) responsible investment arm, ISS ESG. The announcement took place on the 1st of September. The objective is to facilitate compliance with the EU Taxonomy reporting obligations and Sustainable Finance Disclosure Requirements (SFDR).
The EU Taxonomy forms part of the EU Action Plan on Sustainable Finance, created by the EU’s Technical Expert Group on Sustainable Finance (EU TEG). The taxonomy is a system of classification which allows for the categorization of economic activities. They play vital roles in adding to a minimum of one from six pre-defined environmental targets, with no immediate risk to the other five. Products marketed in the EU by financial market participants are presently required to report alignment with the first two taxonomy objectives, climate change mitigation and climate change adaptation.
The EU SFDR sets up harmonised rules for financial market participants including investors and advisers on transparency with regards to the integration of sustainability risks and the consideration of adverse sustainability affects in their processes and the provision of sustainability‐related data which concerns financial products. Among these rules are requirements for financial market participants to announce the principal adverse impacts (PAI) that investment decisions have on sustainability factors, formed from a list of indicators encompassing climate and environment, as well as social and employee matters, respect for human rights, anti-corruption and anti-bribery aspects.
ISS ESG’s new EU Taxonomy Report provides a quick picture of the Taxonomy-eligible portion of a portfolio, in addition to the full alignment assessment across all issuers within a user’s portfolio, including a view of EU Taxonomy alignment by Objective, covering Climate Change Adaptation and Mitigation requirements, with the remaining four objectives to be included once the regulations have fully defined their activities.
The SFDR Report will cover all obligatory data-points related to specific PAI indicators and metrics, including 20 additional indicators. It addresses SFDR Level 1 disclosure obligations by leveraging assets from other ISS ESG solutions. According to ISS ESG, investors could use this data for their Adverse Impact statement, as well as provide supporting evidence of the classification of products and portfolios into Articles 6, 8 and 9 of SFDR.
Dr. Maximilian Horster, Head of ISS ESG said:
“Navigating the complexities of the new ESG-related rules is now easier – upload your portfolio to ISS ESG’s online DataDesk platform and at the click of a button, get relevant and actionable insights regarding your portfolio’s regulatory compliance.”