ESG for Asset Managers: Workiva’s Take and Solution
The regulatory scrutiny relating to sustainability has increased significantly for asset managers with the introduction of the Sustainable Finance Disclosure Regulation (SFDR) and the Task Force on Climate-related Financial Disclosures (TCFD). As these are the regulators' approaches to entity and product-level sustainability reporting in the EU and U.K., the increased burden must be assessed and strategically approached for each asset manager in scope.
The European Commission introduced the SFDR intending to bring a level playing field for financial market participants (FMP) and financial advisers on transparency concerning sustainability risks and impacts on their investments. Furthermore, the SFDR also stipulates that any firm worldwide that markets or intends to market its products in the EU falls under the SFDR requirements.
In the U.K., the TCFD framework is mandatory to better equip investors in their investment decisions, making it easier to compare and contrast companies' exposures to climate-related risks and opportunities. This requirement applies to all U.K.-premium and standard listed companies, regardless of whether they are an asset manager.
These regulations apply at both the entity and product levels, with the SFDR requiring disclosures on one's website, in prospectuses, and in periodic reports, irrespective of the asset manager in scope having an expressed ESG or sustainability focus.
Asset managers in scope for the U.K. TCFD disclosures are required to ensure the disclosures in their product-level report are understandable and, where needed, provide additional information to help educate the reader.
For both the SFDR and the TCFD, the first wave of product-level disclosures was due June 30, 2023. In the U.K., asset managers with over £50bn AUM are impacted first. However, asset managers with over £5bn AUM but under £50bn AUM need to disclose product-level TCFD reports beginning June 2024.
So what do these regulations and disclosure requirements mean for asset managers, and what do you need to do to ensure you comply?
The uniqueness of ESG reporting as asset managers
Let’s explore the regulatory landscape specific to asset managers, shed light on the differentiating factors that make ESG reporting unique per industry, and how to approach and resolve these challenges with technology.
Operating in a dynamic regulatory environment, asset managers face the substantial influence of the TCFD and the SFDR on ESG reporting requirements. The TCFD framework aids organisations in evaluating and disclosing climate-related risks and opportunities, while SFDR seeks to standardise ESG reporting across the EU.
It’s important to select technology partners that understand the significance of these frameworks. For example, Workiva offers asset managers a comprehensive platform that integrates TCFD and SFDR reporting requirements. Our platform empowers users to capture and analyse data related to climate risks, opportunities, and mitigation strategies, ensuring compliance with TCFD recommendations. Moreover, Workiva's customisable solution allows users to configure sections dedicated to SFDR reporting, encompassing Article 8 and Article 9 periodic and pre-contractual disclosures and the Principal Adverse Indicators (PAIs).
ESG reporting in the asset management realm is very complex. Asset managers must navigate a diverse portfolio of investments, each carrying its own ESG considerations. Additionally, they need to align their reporting with their client's preferences. Recognising these challenges, Workiva has developed an approach tailored specifically to asset managers' needs.
Workiva’s approach to ESG reporting for asset managers
Workiva's platform is meticulously designed to address the unique requirements of asset managers when it comes to ESG reporting. Our solution enables users to collect and analyse ESG data at the asset level, providing granular insights into the sustainability performance of each investment. This comprehensive approach empowers asset managers to make well-informed decisions and effectively communicate their ESG performance to clients and stakeholders.
Workiva goes even further by facilitating asset-level reporting, allowing users to consolidate data from a multitude of sources, including both internal and third-party providers. With Workiva, you gain access to a centralised repository that serves as a hub for tracking and reporting on key ESG metrics for each investment, offering a holistic view of your portfolio's sustainability performance. By leveraging our platform, asset managers can efficiently collect, validate, and assure ESG data for reporting, eliminating the burden of manual efforts and reducing the risk of errors.
Furthermore, Workiva acknowledges the diverse personas within the asset management industry. Our customers can leverage advanced permissions and controls to ensure data integrity and security. We create a customised environment for each user, empowering asset managers to configure the platform according to their individual needs and preferences. Additionally, our unlimited user license model allows you to grant access to all relevant stakeholders involved in portfolio-level ESG reporting, fostering collaboration and transparency.
We are committed to providing asset managers with a comprehensive solution streamlining portfolio-level ESG reporting. Our platform effectively addresses asset managers' unique challenges in complying with regulations such as TCFD and SFDR. By enabling asset-level reporting, providing granular insights, and offering customisable features, Workiva empowers asset managers to efficiently collect, analyse, and report ESG data, exemplifying their commitment to sustainable and responsible investment practices.
With Workiva as your trusted partner, you can confidently navigate the intricate landscape of ESG reporting and meet the evolving needs of your clients and stakeholders. We’re dedicated to supporting your success and ensuring your ESG reporting journey is smooth sailing.
Request a demo of our ESG solution for Asset Managers here!