What is the EU Sustainable Finance Package?

What is the EU Sustainable Finance Package?

The EU Sustainable Finance package1 is one of the most ambitious legislative plans globally which aims to:

  • Reorient capital flows towards sustainable investment in order to achieve sustainable and inclusive growth
  • Manage financial risks stemming from climate change, resource depletion, environmental degradation and social issues
  • Foster transparency and long-termism in financial and economic activity
 

Who does it impact?

  • Investors (asset managers) operating in the European Union
  • Investors outside the EU may be impacted or wish to follow the requirements if they manage European assets
  • Other jurisdictions are also looking at putting in place similar measures

How can we help?

How can we help?

In February 2021, we launched the EU Sustainable Finance Module (details below) which includes SFDR Adverse Impact and EU Taxonomy Alignment data and metrics for over 10,000 corporate equity and fixed income issuers, including the MSCI ACWI Investable Market Index covers approximately 99% of the global equity investment opportunity set

Index-level SFDR indicators for MSCI Indexes

This summer, we are planning to release a new module with SFDR index-level metrics for over 6,000 indexes based on issuer data from the recently launched MSCI EU Sustainable Finance Module. The index level metrics will include Mandatory Adverse Sustainability Impact Indicators to help clients compare and report on their financial products’ SFDR indicators.

Download an illustrative sample of some of these index-level metrics for select indexes.

 

We also aim to roll out additional content, delivery mechanisms and reporting options, including:

  • Access to the MSCI EU Sustainable Finance Module on MSCI's analytics platforms for reporting, portfolio construction and risk management
  • Adverse impact and Taxonomy metrics for over 54,000 funds, fund of funds and ETFs
  • Expanded multi-asset class coverage
  • Standard Reporting templates to facilitate batch reporting at the product and entity level
  • Standard and custom reporting options through MSCI's reporting services

The reporting requirements for SFDR differ for real estate investors but focus on three main elements; Adverse Impacts, ESG Risks and ESG Impacts. We’re committed to providing support for these requirements with our existing climate solutions as well as new automated disclosure reporting. We’ve also put together a guide to understand how investors can begin to approach the regulation.

 

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MSCI EU Sustainable Finance Module

MSCI EU Sustainable Finance Module

The module includes two new datasets:

  • SFDR Adverse Impact Metrics


    Access issuer-level data on adverse sustainability indicators1 such as GHG emissions, Energy Consumption, Biodiversity, Water, Waste, Social and employee matters, Human Rights and Anti-corruption and anti-bribery.

    Dataset of over 10,000 corporate equity and fixed income issuers, includes:
    • 14 principal adverse impact (mandatory) indicators
    • 19 additional (voluntary) indicators

  • EU Taxonomy Alignment


    Access percentage revenue from activities likely to address one or more of the six environmental objectives of the EU Taxonomy.

    Dataset of over 10,000 corporate equity and fixed income issuers incorporates controversial practices that could indicate breach of the:
    • Taxonomy’s Minimum Safeguards,
    • and Do No Significant Harm criteria.

    Underlying data inputs: Environmental Impact Metrics, ESG Controversies, Business Involvement Screening Research: Tobacco & Controversial Weapons.

Dataset delivery includes:

 

Dataset delivery includes:

MSCI ESG Manager platform
MSCI ESG API
Data Feed

Supporting your regulatory requirements

 

Supporting your regulatory requirements

 

 Regulatory ReportingPortfolio ConstructionFundamental Analysis
EU Taxonomy Alignment
  • Address EU ‘comply or explain’ disclosure requirements on the degree of potential Taxonomy alignment of financial products
  • Internal analysis of degree of potential Taxonomy alignment
  • Differentiate strategies & explain how Taxonomy is integrated into investment process
  • Demonstrate degree of potential Taxonomy alignment
  • Develop Taxonomy-aligned investment products
  • Satisfy client mandates for Taxonomy alignment
  • Integrate Taxonomy signal with ESG analysiss
  • Identify Taxonomy aligned companies
SFDR Adverse Impact Metrics
  • Address EU ‘comply or explain’ disclosure requirements on the degree of potential Taxonomy alignment of financial products
  • Address EU adverse sustainability impact regulatory reporting requirements
    • Mandatory at entity level for firms of over 500 employees – report on all principal indicators plus two additional indicators (one environmental, one social)
    • Entity-level disclosure on ‘comply or explain’ basis for firms with less than 500 employees
    • Can support product level disclosures for article 8&9 products, i.e., to answer how are indicators for adverse impacts on sustainability taken into account?
      • Internal analysis of exposure to adverse impacts
      • Differentiate strategies & explain how adverse impacts integrated into investment process
  • Satisfy client mandates relating to avoidance of adverse impacts
  • Leverage data in security selection and portfolio construction
  • Integrate adverse impact data with ESG risk analysis

 


Sustainable Finance Solutions Related cards

Sustainable Finance Solutions footnotes

1https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance_en