Regulators around the globe are increasingly focusing on environmental, social and governance (ESG) data disclosures and standardization to better monitor progression towards strategic environmental objectives in particular, and to channel investment towards sustainable products and projects.
The intent is to provide transparency into how companies are transitioning their activities towards more sustainable processes, while providing greater conformity of corporate-level ESG indicators so they can be more easily compared based on their sustainability behaviour.
Through the establishment of clear definitions, terminology and mandatory assurance, the intention is to prevent a prevalence of “greenwashing”. ICE closely monitors the regulatory environment in EMEA, APAC and the U.S. (both federal and state level).
SFDR introduces various disclosure-related requirements for financial market participants (FMPs) and financial advisers at the entity, service and product level. The aim of the regulation is to provide more standardization and transparency on sustainability within the financial markets, preventing greenwashing and ensuring comparability. SFDR defines three categories of product:
Financial products which have “sustainable investment” as their objective (Article 9)
Financial products which promote, amongst others, ESG characteristics of the investment (Article 8)
All other financial products — products that do not purport to promote any kind of ESG objective
For these three categories, FMPs and financial advisers need to disclose pre-contractual and periodic reports regarding how adverse indicators have been considered, use of benchmarks, and how objectives are measured. For larger FMPs, they must also publish Principal Adverse Impact (PAI) Disclosures across their investment portfolios or funds.
Manufacturers of financial products (e.g. insurance or pension-based products, UCITS, AIFs) are now publishing sustainability classifications in KIDs/KIIDs, prospectuses and EMT/EPT forms. ICE is making the classifications listed above available in data feeds to help customers satisfy their investor protection obligations with regards to suitability assessments.
To help aid in compliance with the regulation, ICE offers the SFDR PAI solution. Provided in conjunction with our ESG risk data partner RepRisk, an ESG data science company, ICE offers up-to-date input values for 13 of the 14 mandatory corporate SFDR indicators and can provide inputs for 28 of the 33 optional indicators. The dataset is taken from our wider ICE ESG Reference Data service that captures over 500 company-reported data points; these are consolidated into the product for an extensive range of use cases.
Detailed ESG attributes and indicators that may be financially-material, such as greenhouse gas (GHG) emissions reported, board diversity, benefits and many others, sourced from both company and publicly-available third-party sources.
A range of solutions for fixed income sustainable benchmarks that account for ESG factors in addition to other criteria, and the Global Carbon Futures Indices which serve as benchmarks for the global price of carbon.
ESG regulation is shaping the investment landscape in Europe. To help our clients navigate these challenges, we share key takeaways on the new requirements and how ESG data can help you gain compliance.
A patchwork of ESG standards across the investment landscape can often make meaningful comparisons difficult. Learn how consistent and reliable data can help you navigate these challenges.
When it comes to ESG, not all data are created equal. Companies use their judgment in determining what information to disclose, in what format and which metrics to use. Having access to granular data is essential to making those judgments.
1 IDI in providing these Sustainability Indices is not intending to interpret or give guidelines on the EU Taxonomy disclosures nor the EU criteria for environmentally sustainable investments. Please refer to the Methodology for each of the ICE Sustainability Indices for additional information: ESG indices, Green Bond indices and Carbon Reduction Futures indices.