*This episode originally aired on the Coffee and Regs podcast and is cross-posted here with permission.*
Greg Hotaling is a Regulatory Content Manager at Compliance Solutions Strategies (CSS), specializing in global regulatory matters relevant to the financial industry. Marye Cherry is the EU Regulatory Counsel and Head of ESG at CSS. She is an expert in transparency and regulatory reporting issues in the financial services industry, including ESG. In this episode of a special two-part series, Greg and Marye demystify the complicated world of ESG including the latest regulatory developments, the complexity of ESG data, and what ESG actually means for investment managers.
About ESG
ESG, green initiative, and sustainability are often used interchangeably; according to Marye, they all refer to the underlying principles of planet, people, and profit. She tells Greg that ESG is about “doing business in a way that exhibits concern for the long-term health of the planet and for the people who are impacted but still being able to do that profitably.” In the financial sector, ESG “refers to the integration of economic, social, and governance factors in the investment process.” It’s also called sustainable finance, Marye says.
What Investment Managers Should Know
In the past, ESG in the financial sector was mostly based on voluntary frameworks and standards, but in recent years, regulation has become the norm. “ESG will be most relevant in terms of the regulations that are coming or that already exist,” Marye advises investment managers. The EU is the most advanced region in this regard: they have already established several regulations including the Action Plan on Sustainable Finance, and several new regulations are upcoming. Regulation is where the action is in the ESG space, Marye points out.
Save the Date
Greg asks about important dates investment managers should keep in mind. The Sustainable Finance Disclosure Regulation (SFDR) is the upcoming regulation asset managers should focus on, Marye replies, and there are two dates to watch. The first date, March 10th 2021, was the initial implementation of SFDR. EU asset managers needed to classify their financial products under the articles of the SFDR and start to amend their documentation to disclose that classification. “The SFDR went into effect however, before the detailed technical standards were available to the market,” Marye says, and the pandemic further delayed the release of those standards. The standards as well as taxonomy linked disclosures will be released soon in the same document, so listeners should look out for that. The effective implementation date will be July 1, 2022.
Resources
Greg Hotaling on LinkedIn
Marye Cherry on LinkedIn | Twitter
