The EU Sustainable Finance Action Plan is arguably the most comprehensive and detailed set of regulations affecting the field of ESG investing. To comply with the various regulatory deadlines, investors not only need a comprehensive suite of high-quality ESG research and data products and services, but also a trusted partner. Our knowledgeable team can show you how our robust data coverage and award-winning research can help.
Contact us today to begin your EU Action Plan compliance journey.
Sustainalytics and Morningstar are helping investors at every step of their compliance journey. We are continuously enhancing our solutions as regulatory requirements are finalized, providing clients with a full solution at both the company and portfolio level well ahead of regulatory deadlines.
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 solution enables you to incorporate EU Taxonomy criteria in your investment decisions and report on your progress toward addressing climate change. Ultimately covering approximately 10,500 companies this year, it is underpinned by comprehensive estimation and proxy approaches to supplement reported data, providing investors with a more holistic picture of their portfolios’ alignment.
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 with an emphasis on the so-called “Principal Adverse Impact” (PAI) indicators.
To fully comply with all of the SFDR requirements will require a comprehensive set of ESG research solutions that enable investors to identify and manage both ESG risks and potential adverse sustainability impacts. Sustainalytics’ client advisory teams can advise you on finding a suitable mix of research solutions to meet your organization’s needs.
New SFDR Research Solutions
The following company and fund level data solutions were created specifically to support SFDR compliance requirements:
Sustainalytics’ PAI Data Solution is an ESG dataset with rich corporate- and sovereign-level research that 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.
EU Benchmarks Regulation
The EU Sustainable Finance Action Plan includes two amendments to regulation affecting sustainability benchmarks:
1. Climate Benchmarks: The regulation defines new minimum standards for two types of carbon benchmarks: the EU Climate Transition Benchmarks (EU CTB) and the EU Paris-aligned Benchmarks (EU PAB).
2. Disclosure Requirements: Sustainalytics offers three data packages for corporate, sovereign and climate benchmarks, consisting of around130 data points from 12 of our research products.
Sustainalytics’ dataset covers approximately 12,500 companies and 172 countries.
Our dataset and reports can support investors in meeting the regulatory requirements of the EU Climate Transition Benchmarks, EU Paris-Aligned Benchmarks and sustainability-related disclosure requirements for benchmarks with ESG factors.
Sustainalytics can help index providers and benchmark administrators meet mandatory reporting and disclosure obligations while enabling them to screen companies on their eligibility for inclusion in EU Climate Benchmarks. In addition, Morningstar provides ESG Indexes for comparison purposes and benchmarking, as well as the reporting capabilities necessary to generate fund level reports.
Key Features And Benefits
High-Quality ESG Research Solutions
Our established, award-winning ESG research aligns well to regulatory criteria, creating a solid foundation to working towards full coverage
Built on 25+ years of ESG expertise, Sustainalytics’ client advisory team have unparalleled expertise in guiding clients to find ESG solutions tailored to their organization’s needs.
A coherent and consistent approach to ESG
Together with Morningstar, we can provide end-to-end solutions from raw data to managed portfolio and reporting solutions at company and fund level to suit your intended use case.
Strong commitment demonstrated by robust investment in capacity
With over 300 ESG analysts, Sustainalytics has one of the largest research teams in the industry. We have significantly expanded our capacity with more than 30 new analysts to focus on supplementing our established research by focusing on new research areas directly rated to the EU Action Plan.
Combined Regulatory and Product Knowledge
Sustainalytics is collaborating closely with Morningstar’s regulatory and product experts to bring a comprehensive solution to market.
A Single Market Standard
Consistent approach to ESG assessments across the investment spectrum.
Award-Winning Research and Data
Firm recognized as Best ESG Research and Data Provider by Environmental Finance and Investment Week.
End-to-End ESG Solutions
ESG products and services that serve the entire investment value chain.
25+ Years ESG Expertise
500+ ESG research analysts across our global offices.
Largest Second-Party Opinion Provider
As recognized by Environmental Finance and the Climate Bonds Initiative.
Related Insights and Resources
COP 26: A Spotlight on Emerging Climate Action Themes for Investors
Reactions to the COP26 Conference and the resulting Glasgow Climate Pact have predictably run the gamut from claims of greenwashing to the celebration of progress in the fight against climate change. Ultimately, any judgement on COP26 may be premature, as the success of the conference will best be measured in time by the extent to which commitments made are put into motion. While we wait to see the concrete actions that materialize, the past two weeks have underscored the importance of several themes that will garner increasing attention and should be considered by sustainable investors.
Momentum Around Principal Adverse Impact Data Remains Strong Despite SFDR Delays
Despite the shifting timelines, we observe that the market momentum around PAIs is not diminishing, quite the contrary. Investors in the scope of the regulation are using the fourth quarter of this year to get acquainted with PAI data and set up their systems. Most investors we speak with want to be prepared in time to be able to monitor PAIs throughout 2022 and adjust their portfolios to boost their PAIs (or rather limit the downside, as these are adverse impact indicators). This means that PAIs may significantly impact stock selection and portfolio construction by fund managers keen to have ‘good’ PAI scores.
SFDR and EU Taxonomy Product Disclosure Rules Finally Released
The publication of these rules marks the end of a prolonged period of uncertainty in the market around final rules and timelines - assuming the RTS will be adopted as-is in a Delegated Act, which turns these rules into regulation. There are several noteworthy aspects to these rules, which we address from our perspective in this article.
The Governance of Killer Robots: What Investors Should Know
The ethical implications of lethal autonomous weapons systems (LAWS), often referred to by their dramatic moniker ‘killer robots’, have long been a topic of interest. Until recently, debates about LAWS were relegated as hypothetical, with the technology assumed to be under development and out of reach. Such assumptions may be due for reevaluation, and while a firm conclusion is yet to be drawn, it is worthwhile presenting them to the ESG investment community.