Sustainability tech platform Clarity AI has partnered with London Stock Exchange Group-owned Refinitiv to develop an SFDR data coverage tool.
SFDR Reporting Professional will feature combined capabilities from both companies, leveraging data coverage of more than 50,000 companies to help investors build reports needed to comply with the European directive.
It will map more than 20 indicators, including 16 values that are mandatory under SFDR.
Data will be accessed via API (Application Programming Interface), and the fully integrated tool will include the ability to aggregate at a portfolio level.
The tool will produce templated PDF reports, which can be accessed to ensure easy reporting to the regulators. It is complemented by LSEG’s range of reported data on ESG, fundamentals, funds and sovereigns.
The SFDR is a critical component of the EU’s Sustainable Finance Action Plan, which aims to encourage capital to flow towards companies and activities that support the EU’s environmental and social objectives.
It was introduced in March 2021 and has acted as a regulatory catalyst for ESG developments across Europe.
It requires financial institutions to disclose any “Principal Adverse Impacts” their investments have on social and environmental issues and applies to fund groups offering sustainable investment products.
Cornelia Andersson, group leader sustainable finance and investment at LSEG, said the regulations placed additional reporting requirements on those marketing sustainable investment products and “many are requiring comprehensive reporting tools to help them comply”.
“As a provider of some of the most comprehensive sustainability data and indexes available, we are committed to developing leading-edge capabilities working with leading specialist sustainability players,” she said.
Andersson added that LSEG is already exploring future opportunities for collaboration with Clarity AI.
Rebeca Minguela, founder and CEO of Clarity AI, said: “LSEG serves thousands of asset managers who will have to report on SFDR, and accuracy will be key – especially in the environment of high regulatory scrutiny surrounding ESG and sustainability.”
Other data and technology providers have launched SFDR-linked tools since the introduction of the regulation, but with the next wave coming in 2023, the requirements are likely to be broadened.
Already, the second level of rules has had an impact on market participants.
According to Morningstar data, more than 380 products have had their SFDR classification changed over the last quarter, with fund houses representing 41 products downgrading from Article 9 to Article 8 during the period.
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