Institutional Shareholder Services’ (ISS) responsible investment arm, ISS ESG, announced today that it is adding automated portfolio reporting capabilities to its EU Regulatory Solutions suite, aiming to facilitate compliance with the EU Taxonomy reporting obligations and Sustainable Finance Disclosure Requirements (SFDR).
The EU Taxonomy is part of the EU Action Plan on Sustainable Finance, established by the EU Technical Expert Group on Sustainable Finance’s (EU TEG). The taxonomy is a classification system enabling the categorization of economic activities that play key roles in contributing to at least one of six defined environmental objectives, and no significant harm done to the other objectives. Financial market participants with relevant products marketed in the EU are currently required to report alignment with the first two taxonomy objectives, climate change mitigation and climate change adaptation.
The EU SFDR establishes harmonised rules for financial market participants including investors and advisers on transparency regarding the integration of sustainability risks and the consideration of adverse sustainability impacts in their processes and the provision of sustainability‐related information with respect to financial products. Among the new rules are requirements for financial market participants to disclose the principal adverse impacts (PAI) that investment decisions have on sustainability factors, based on a list of indicators encompassing climate and environment, as well as social and employee matters, respect for human rights, anti-corruption and anti-bribery aspects.
ISS ESG’s new EU Taxonomy Report provides a snapshot of the Taxonomy-eligible portion of a portfolio, as well as the full alignment assessment across all issuers within a user’s portfolio, including a view of EU Taxonomy alignment by Objective, covering Climate Change Adaptation and Mitigation requirements, with the remaining four objectives to be added once the regulations have fully defined their activities.
The SFDR Report will cover all mandatory datapoints related to specific PAI indicators and metrics, including 20 additional indicators. It addresses SFDR Level 1 disclosure obligations by leveraging assets from other ISS ESG solutions. According to ISS ESG, investors can use this data for their Adverse Impact statement, as well as to provide supporting evidence of the classification of products and portfolios into Articles 6, 8 and 9 of SFDR.
Dr. Maximilian Horster, Head of ISS ESG said:
“Navigating the complexities of the new ESG-related rules is now easier – upload your portfolio to ISS ESG’s online DataDesk platform and at the click of a button, get relevant and actionable insights regarding your portfolio’s regulatory compliance.”