Sustainability tech platform Clarity AI has partnered with London Stock Exchange Group-owned Refinitiv to develop a Sustainable Finance Disclosure Regulation (SFDR) data coverage tool.
SFDR Reporting Professional will feature combined capabilities from both companies, leveraging data coverage of over 50,000 companies to help investors build reports needed to comply with the European directive.
It will map more than 20 indicators, including 16 values that are mandatory under SFDR.
Data will be accessed via API (Application Programming Interface), and the fully integrated tool will include the ability to aggregate at a portfolio level.
The SFDR establishes harmonised rules for financial market participants 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.
In the upcoming phase of the regulation, set to come into effect in 2023, reporting obligations will include disclosures on the manner in which sustainability risks are integrated into investment decisions,
It will also cover assessments of the likely impacts of sustainability risks on the returns of financial products, measurement and tracking of key performance indicators (KPIs), principal adverse impacts (PAIs) and EU Taxonomy alignment.
The regulation also includes classification levels for sustainability-focused investment funds, including aRticle 8 funds that “promote environmental or social characteristics or a combination of those characteristics,” and the more stringent Article 9 funds, “which have sustainable investment as their objective.”
According to Refinitiv Lipper data, funds representing over $5 trillion and $478 million are subject to Article 8 and Article 9 SFDR reporting obligations, respectively.
SFDR Reporting Professional powered by Clarity AI has been created to enable compliance with the new Level 2.
It will be available to thousands of clients of LSEG’s Refinitiv business, enabling them to aggregate portfolio-level data on funds and assets and complete SFDR disclosure templates.
The underlying instrument-level data can also be used to rebalance portfolios, interrogate their performance and create risk-management strategies.
The new service developed out of a long-tern relationship between Clarity AI and Refinitiv. The former adapted its own SFDR reporting service to work with Refinitiv’s huge data sets, according to Daniel González Gómez, Clarity AI’s global head of distribution partnerships.
“We are excited to partner with the team at LSEG to bring our market-leading SFDR data coverage and reporting capabilities to an even broader base of clients,” said Rebeca Minguela, founder and CEO of Clarity AI.
She added, “LSEG serves thousands of asset managers who will have to report on SFDR, and accuracy will be key – especially in the environment of high regulatory scrutiny surrounding ESG and sustainability.”
