EU Sustainable Finance Action Plan Solutions
A comprehensive suite of solutions to help investors on every step of their EU Sustainable Finance Action Plan regulatory journey
The EU Sustainable Finance Action Plan is the EU’s action plan to integrate sustainability considerations into its financial policy. Building on the recommendations of the High-Level Expert Group on sustainable finance’s report from January 2018, it aims to:
Reorient capital flows towards sustainable investments in order to achieve sustainable and inclusive growth
Manage financial risks stemming from climate change, resource depletion, environmental degradation and social issues
Foster transparency and long-termism in financial and economic activity.
Sustainalytics and Morningstar are committed to helping clients on every step of their EU Sustainable Finance Action Plan regulatory journey. We have further ramped up capacity to produce new research and incrementally and continuously enhance our solutions as regulatory requirements are finalized and corporate reporting improves, providing clients with a full solution at both company and portfolio level well ahead of regulatory deadlines.
Our solutions align with the following three components of the EU Sustainable Finance Action Plan (Click on the different sections to learn more):
Sustainable Finance Disclosure Regulation
The EU’s Sustainable Finance Disclosure Regulation (SFDR) introduces new rules for how investment managers need to incorporate and disclose sustainability risks and factors.
Sustainalytics’ PAI Data Solution, which is an ESG dataset with rich corporate- and sovereign-level research, can help investors to identify and understand the adverse sustainability impacts of their investments to fulfill the SFDR disclosure requirements. The PAI Data Solution complements and builds on Sustainalytics’ established, high-quality ESG research that already aligns very well to the remainder of the SFDR requirements.
Morningstar will collect and disseminate EU ESG Fund Type information, i.e., Article 8 & 9 flags, as well as key data points from updated SFDR-compliant prospectuses. In addition, its market leading “Full Holdings” database will enable users of third-party funds, like advisors and fund-of-funds, to access underlying securities’ PAI assessments, looking through funds to their underlying exposures. This is a huge benefit for these users as the regulation requires entity level disclosures to be calculated using security level data.
Webinar: SFDR: Raising the bar for sustainability disclosures
Join Morningstar and Sustainalytics’ regulatory and policy experts on 18 March for an update on the latest SFDR developments and learn how we can help you in your compliance journey
EU Taxonomy Solution
The Taxonomy is a classification framework designed to determine whether an economic activity is environmentally sustainable. There are three main criteria that activities will be screened on to determine alignment with Taxonomy objectives:
1. Substantial Contribution
2. Do No Significant Harm
3. Minimum Safeguards
Our EU Taxonomy Solution provides ESG research and data that assesses clients’ holdings and portfolio alignment to the EU Taxonomy.
We currently offer a Taxonomy Data solution and a Managed Portfolio Service. The Managed Portfolio Service provides a portfolio-level alignment assessment and the Data solution provides company-level assessment along with the supporting underlying company-level data.
In 2021 we will enhance our solution on two fronts:
1. Adding activity-based involvement research for all Taxonomy activities
This will provide revenues, CAPEX and OPEX data (where available) associated with Taxonomy activities, supporting a substantial contribution assessment.
2. Portfolio/fund level aggregation
Our data and reporting solutions will also soon be available through Morningstar and Sustainalytics platforms.
In light of the EU Action Plan, the EU Benchmarks Regulation has been amended on two fronts:
- Creation of minimum standards for two new types of climate benchmarks: the EU Climate Transition Benchmarks (EU CTB) and EU Paris-aligned Benchmarks (EU PAB).
- Definition of ESG disclosure requirements – applicable to all investment benchmarks.
Sustainalytics supplies three data packages for corporate, sovereign and climate benchmarks consisting of approximately 130 data points from 12 of our research products. This solution can help index providers and benchmark administrators meet mandatory reporting and disclosure obligations and enable them to screen companies on their eligibility for inclusion in EU Climate Benchmarks. Fund managers may also leverage this data to create passive products, such as climate-aligned ETFs.
Morningstar will launch a series of climate benchmarks this year that leverages Sustainalytics’ research.
Key Features and Benefits
Trusted ESG provider: Leveraging 25+ years of existing research
Universe coverage of 12,000+ companies across 138 sub-industries
Research team exclusively focused on the EU Sustainable Finance Action Plan
Criteria-specific mapping and data