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SDR implementation

  • 1.  SDR implementation

    Posted 11-01-2024 10:39

    Sorry to bother the group, but I was just wondering if anyone has seen work/research looking at the implications of implementing the new SDR rules? Might it be helpful for us to draw a group together for an online discussion about some of the technicalities of that? Perhaps we could try to draw up a checklist for members (or even better to circulate someone else's if it's thought to be good/comprehensive). Thanks, Will



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    William Goodhart
    Chief Executive
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  • 2.  RE: SDR implementation

    Posted 12-01-2024 11:08

    Hi William,

    I think this would be a great idea.

    I know working in an Asset Management Firm myself we are currently tackling both what Labels to assign our funds, and overcoming the first hurdle of the anti-greenwashing rule coming into play in May.



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    Francesca Wheble
    Responsible Investment Analyst
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  • 3.  RE: SDR implementation

    Posted 15-01-2024 09:40

    Thanks Francesca. I think there probably are a large number of implementation challenges. I think it would be helpful first to get our heads around what's on that list and then to see if we can provide some proposed good practices on a number of the challenges that might be more common to our members. 



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    William Goodhart
    Chief Executive
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  • 4.  RE: SDR implementation

    Posted 16-01-2024 09:07

    Hello Will,

    I would highlight this excellent summary from ESG Accord:

    https://www.linkedin.com/posts/elly-dowding_esg-accord-ps2316-review-activity-7141384989266382849-29M6/

    More than happy to help out here by providing some thoughts from a DFM's perspective too.

    Best,



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    James Peel
    Portfolio Manager
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  • 5.  RE: SDR implementation

    Posted 16-01-2024 10:06
    Edited by Aya Pariy 16-01-2024 10:07

    Hi James, great to see you online and thank you for sharing.

    If you feel comfortable and have time, it would be great to hear your insights and what most urgent regulation related things you are tackling from DFM's perspective :-) here, in this online discussion thread.

    Myself and my colleagues together with community champions are planning events around regulatory updates and issues so anything you share here would be extremely helpful for myself, but also for other members reading this post.

    Thank you!



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    Aya Pariy
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  • 6.  RE: SDR implementation

    Posted 16-01-2024 10:09

    Thanks James. That is a really good resource, with good signposting to the different measures that firms in different market sectors should take. I guess what I'm wondering about is where they say things like 'firms should prepare...', 'firms should decide...', what's the best way to do that? What should be on a preparation checklist? What should be in a decision-making framework? It would be great to either direct our members to info on that or perhaps to come up with some ideas following a virtual roundtable. Is that something that the community would find useful?



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    William Goodhart
    Chief Executive
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  • 7.  RE: SDR implementation

    Posted 17-01-2024 16:37
    There should be a best practice checklist.  The difficulty is picking the height of the bar for defining sustainable then making the disclosure transparent and understandable as a product communication.  This should all tie back to the investment process and how "sustainability" is assessed.  If the process can be explained clearly and authenticity it matters.  There seems a lot of flexibility in practice so I hope FCA might give more guidance or case studies then look to do some spot checks with marked homework perhaps redacted a bit  to demonstrate what they expect before using fines to enforce standards. 
    How acceptable is it to subcontract the scoring to a third party? either entirely or on a quality assurance basis. 
    David

    Sent from my iPhone





  • 8.  RE: SDR implementation

    Posted 16-01-2024 12:43

    Hi William,

    Where to start...

    The first part of the regulation currently comes into play in May, the Anti Greenwashing Rule. Whilst we await the consultation to close, with a response to then be written, we are starting to think about how we will meet the Rule.

    From compliance checklists, to creating evidence documents...there is not currently a right or wrong way to meet this.

    I guess another burning question is...what funds will be assigned what labels. A Morningstar paper stated that roughly 8% of all UK domiciled funds will be assigned a label (roughly 300 funds). Will we have the same situation where funds will re-assign labels like the SFDR Article 8 and 9.

    We then have those funds that require the 'non-label' designation, and then all the reporting to do.

    There is a lot to work on, however I guess the first step is working out what the Anti-Greenwashing Rule entails and what we need to do to meet the regulation!



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    Francesca Wheble
    Responsible Investment Analyst
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  • 9.  RE: SDR implementation

    Posted 19-01-2024 17:57

    Agree Francesca - if your in scope as a UK authorised funds option available from 31 July is whether you opt for a label or not.  Summary below of my thoughts on where priorties are so far. 

    Else priority is Anti-greenwashing (AGW) rule 31 May and Distributor rules coming in to play from 31 July - the IA and other industry bodies like PIMFA are responding to FCA AGW consultation closing 26 Jan so priority focus on there and best practice - its very broad and wide.    Good summary of requirements by the various law firms so far - Simmons & Simmons, Eversheds and the like.

    The Investment Association has convened a SDR Implementation forum for member firms so best practice will develop in a number of areas.

    Else, awaiting FCA consultation on extension to Portfolio Management Services (expectly shortly) and to follow, extension to overseas funds with HMT consultation.  Not to mentioned the FCA's announcement on industry developments to suppor the advisory process (this will have significant practical implications) FCA establishes industry-led working group for financial advisers | FCA



      



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    James Doyle
    Director, Green Finance, Investment Management
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  • 10.  RE: SDR implementation

    Posted 23 days ago

    Dear all,

    Following your conversations from last week, we are running a "Virtual Roundtable. Tackling SDR implementation challenges together" hosted by CFA UK's CEO @William Goodhart

    We are delighted to bring two experts from KPMG, Rachel Poole and Michael Johnson, to open up the discussion with a presentation on how investment managers should frame their work on implementing the SDR rules. You will be able to ask questions and explore the challenges with each other.

    February 8th, 1 pm UK time. Book your place here

    Hope to see you there!



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    Aya Pariy
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  • 11.  RE: SDR implementation

    Posted 15 days ago

    Good morning everyone.

    Very excited to see you tomorrow, 1 - 1:45 pm UK time, online for our SDR Implementation round table. @William Goodhart will be hosting and we have invited speakers from KPMG.

    You can still book your free place today using this link.

    For those who have booked, the zoom link will be sent to you by my colleagues tomorrow morning.

    Thank you and see you there.



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    Aya Pariy
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  • 12.  RE: SDR implementation

    Posted 15 days ago

    I'm v much looking forward to it. I think what we're trying to get to is a good framework for addressing the challenges of SDR implementation and some insights into a few of the key challenges. See you there.



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    William Goodhart
    Chief Executive
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  • 13.  RE: SDR implementation

    Posted 14 days ago

    Hey Aya, Just wanted to check if the zoom links have been sent out? I registered for the event last week but haven't received any link yet. Is there anyway you could send me the link privately? Thanks!



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    TANISHQ NAVEENBHAI JAIN
    Senior Associate
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  • 14.  RE: SDR implementation

    Posted 9 days ago

    Hi everyone. I wanted to share what we see in the press today about how UK managers are racing to apply SDR Lables. Here's a snap shot:

    Financial Times:  In brief, asset managers are actively preparing for SDR implementation by:

    • reviewing their communications
    • adjusting products to meet criteria
    • collaborating with advisers

    Luke Murray from Bovill says that managers that use sustainablity language but do not offer sustainability products are now applying rigour to how they communicate to clients through materials on their website for example. Asset managers, according to Luke, are going through the qualifying criteria for labels to ensure their funds meet the requirements. This has taken the form of a mapping exercise to go throught he areas of the criteria, to see where the gaps are in meeting the label.

    Stuart Burnside, head of product governance and ESG product at M&G Investments mentions 13 ESG-associated UK funds offered to retail investors by M&G where the SDR and labels regime would be applicable. Out of those 13 funds, 10 are esesntially parallesl to SFDR article 9 funds. They are already quite "dark green". 

    Shroder's spokeperson says that they have developed infrastructure and technology to monitor engagement activity, which they believe will help ensure meeting the SDR requirements.

    more information here 



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    Aya Pariy
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  • 15.  RE: SDR implementation

    Posted 7 days ago
      |   view attached

    Good morning community.

    There is a lot of regulation and updates these days. Many agree that with the UK Sustainable Disclosure Requirements (SDR) and investment labels, the FCA has taken on board much of the feedback from the industry. Many feel optimistic that SDR may not be as big of a minefield as the EU's Sustainable Finance Disclosure Regulation (SFDR).

    Here's the brief overview of UK SDR from Novata with a nice summary 

    FCA's own summary and timelines are here

    What do you think - do you feel optimistic? What are your main challenges that you are foreseeing? Can other members help?



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    Aya Pariy
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    Attachment(s)



  • 16.  RE: SDR implementation

    Posted 6 days ago

    Thanks Aya - i feel optimistic in that the FCA has actively engaged and listened to feedback from firms in its consultation process and will continue to - as noted in recent Sustainability Advisors group announced a few weeks ago, supported by PIMFA as Secretariat.

    Immediate challenges are around covering off the requirements to address the new Anti-greenwashing rule from 31 May  - there's a lot of practical considerations and the scope is broad, applying to all communications where sustainability claims or terms are used in conjunction with promotion of FCA regulated investment products and services.  The FCA's draft guidance and consultation on anti-greenwashing outlines some examples of what they see are principles to be applied (now closed end Jan) so will be interesting to see what further examples of good/poor practice and clarifications when the FCA issues its finalised guidance - there are a number of areas that need further clarification and use of sustainability related terms/further examples e.g. when discussing at entity level, use of images, positive examples of language that is acceptable and not misleading etc e.g. see PIMFA's response as an example of one of the many industry bodies that have responded.  



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    James Doyle
    Director, Green Finance, Investment Management
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