Hari Bhambra Global Head of Compliance Solutions at Apex Group says the implementation of the SFDR represents a game-changing piece of regulation.
However, whilst many have been racing to prepare, today marks the start of the ESG disclosure journey for financial services, not the finish line. Now is not the time for managers to take their foot off the accelerator pedal.
Beyond the immediate compliance obligation that today signifies, the SFDR is only the beginning of ESG regulation for global financial services, a sector which transcends jurisdictional boundaries, and we anticipate the imminent introduction of regulations in various markets which implement equivalency to the SFDR. Non-EU managers should see the current time as an opportunity to get ahead of the game and to ensure they can collect and analyse relevant ESG data, before the inevitable introduction of new regulation in their domestic markets.
We remain concerned that managers have been so focussed on rushing to meet the deadline that they have been short-sighted and have not put in place sustainable processes and systems with the capability to respond to future evolution or expansion of mandatory ESG disclosures. The requirements on those in scope are going to increase as ESG legislation develops – to prevent being unprepared as reporting requirements evolve, they should put in place systems as soon as possible, which collect data currently seen as optional, as well as the information needed to monitor and track ESG performance over time.
ESG is not just an inconvenient addition to the regulatory burden. Compliance, whether mandatory or voluntary should be seen as a business enabler and going forwards, proactively integrating these risks into internal operations and disclosures delivers commercial advantage to many funds, that may be the difference between gaining capital investment or losing it.”