Mikkel Bates, regulatory manager at FE fundinfo and ESG Clarity Committee member
Reflecting on what has been a tumultuous 2022 for ESG and markets in general, what has been your biggest challenge and how have you overcome it?
We have said it every year for the last three or four years that the previous one was huge for ESG investment and disclosures, but 2022 easily caps all previous years!
As a data solutions provider, our biggest challenge has been keeping up with the many changes to the disclosure rules, particularly in the EU, and making sure that we can consume and disseminate the latest version of the disclosure templates.
Things have not been helped by the Q&As published by the regulators in November, just six weeks before the Level 2 live date. There were 60 questions covering PAI disclosures, product disclosures and taxonomy-aligned disclosures, but, fortunately, our disclosure solution is independent of the client’s choice of ESG rating provider. So our challenge has been to ensure we can receive the latest version of the European ESG Template (EET) and populate the current disclosure templates.
On the other side, I like to feel we foresaw the mass reclassification of Article 9 funds in September, following confirmation from the regulators that these funds could only invest in sustainable assets, as the first wave of EETs we received had most of them stating a minimum commitment, if at all, of much less than that.
Please provide one prediction for the ESG investment world for 2023.
We probably see the world differently from many others. To us, the ESG investment world is about the development of disclosure requirements, the clarity of definitions and the availability of useful and meaningful data. In that context, there are several things we already know will be happening in 2023.
In the EU, the SFDR Level 2 templates will be mandatory for Article 8 and 9 and PAI disclosures.
In the UK, the consultation on sustainability disclosure requirements and investment labels (CP22/20) will end in January, the FCA will publish its policy statement in the middle of the year, and its general anti-greenwashing rule will come into effect at the same time.
Being optimistic, I would predict that, despite the delay announced in Parliament just before Christmas, there will be at least a first draft of a UK green taxonomy published during 2023. Even more optimistically, I hope it will more than ‘build on’ the EU taxonomy, but will look very similar. This isn’t because I think the EU taxonomy is perfect, but because it’s already out there and the more similarity there is the better it will be for international companies and funds that need to report their alignment.