Anevis Interview Series Part III: ESG and SFDR with Dr. Valentin Ratz

In this part of our interview series, we will learn about the creation of ESG and SFDR reports and why the importance of these reports will increase in the future. Valentin is our expert in this matter as well as the team lead of the key accounts team here at Anevis. Over the last few years he has gained a lot of experience in the creation of ESG reports, which he now applies to the creation of SFDR reports for our customers.

Can you give us a brief summary on the state of regulatory requirements for ESG/ SFDR reporting and tell us why sustainability reporting is so important right now? 

Sustainability reporting in general is currently so important because of two key drivers. One of them is the EU’s SFDR regulation. Even if many deadlines are postponed in this respect, it is clear that gradually more and more ESG data will have to be disclosed in the future due to this regulation.

The EU has developed a draft for detailed sustainability reporting, the SFDR reporting. In this reporting all financial market participants have to disclose various general sustainability key figures and principal adverse impact indicators which means that they have to disclose what impact their investments have regarding sustainability factors like greenhouse gas emissions, biodiversity, water and waste management, but also regarding social and governmental aspects like human and labor rights.

In the coming years, such reporting must be prepared on a regular basis for all funds, which results in very high regulatory pressure. In this context, the EU is developing its own taxonomy, i.e. its own set of rules on how these sustainability indicators must be calculated and presented. Therefore, all FMPs are forced to take actions to comply with the SFDR regulation.

The second key driver is the rapidly rising demand for sustainable financial products from the customer side. In order to meet that demand, FMPs must adapt their products and set up new funds, which then can be promoted with convincing and attractive sustainability reports.

What information/data do we need for ESG/ SFDR reporting?

Currently, only certain metrics must be available if a fund is to be designated as “sustainable”. What exactly depends again on the specific SFDR categorization (Article 6, 8 or 9) of the fund.

ESG sections on factsheets and small ESG Reports often only show the ESG score or ESG rating for the entire portfolio and the amount of CO2 related to one million US dollars invested as key figures and some general information on the sustainability profile. This is the most basic information we need.

Furthermore, inclusion or exclusion criteria are shown on the reports, i.e. on which sustainability criteria a special focus is placed or in which case companies may not be included in the portfolio, e.g. if they generate a certain part of their sales with weapons, tobacco, alcohol, gambling, etc. Here we need data on the extent to which companies are involved in certain business areas, as well as information on which inclusion and exclusion requirements the clients set themselves.

Finally, there are specialized SDG-reportings, Greenhouse gas GHG-reportings, reporting regarding conformity with the Paris Climate Agreement or regarding conformity with the EU taxonomy and much more. For the preparation of these reports we need detailed data on SDG, GHG, temperature scenarios or EU taxonomy respectively.

As soon as the SFDR reporting will be mandatory, we need a clearly defined set of information. The EU has still to make the final decision on what data exactly, but it will definitely contain some general sustainability figures like ESG scores and ratings, CO2 figures and a set of mandatory and voluntary PAI indicators so that we are able to calculate and present the information and figures compliant with the regulation.

Why is a cooperation with Anevis Solutions on ESG/ SFDR reporting so beneficial? 

We have already implemented many customer projects in the area of ESG reporting and accordingly many interfaces to a number of well-known ESG data providers are already available. Due to that, we have great knowledge and expertise regarding the calculations and the many edge cases that need to be taken into account here. Additionally, we have great knowledge and expertise in terms of relevant regulatory requirements. Since the amount of data that needs to be processed is huge and since the ESG requirements from regulatory and from client side evolve very fast, this is definitely a big plus.

Another important point is that from an abstract point of view, sustainability reporting is just another type of reporting where data needs to be processed and presented in an automated way. Since the automated generation of individualized fund reportings is our key strength where we have many years of experience and the necessary infrastructure for data and document processing, we can easily add the necessary interfaces to ESG data providers and are able to offer highly individualized sustainability reportings as well.

What are the options for design individualization SFDR/ ESG reporting? 

The layout and design of ESG reports can be very individual, as it is the case with our highly individualized fund factsheets. SFDR reports are subject to stricter regulations  compared to factsheets or other forms of presentation of sustainability data, but here as well a number of possibilities to individualize such reports exist.

Data integration is an important point here. That means for example through the involvement of the client’s internal research departments for the categorization of sustainable investments or through the additional integration of other sources of sustainability data.

For sustainability reports in general, it is very important how the figures are presented in terms of layout and design. We constantly further develop our products in that respect and can of course draw upon many years of experience in the field of automated generation of individualized reports, presentations and web content.

If you would like to know more about Anevis Solutions and our service, feel free to contact us. We would be happy to work with you.

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