Funds regulation and compliance services provider Ocorian has outlined expected changes to the EU’s Sustainable Finance Disclosure Regulation (SFDR) – currently subject to a review by the European Commission. Alternative asset managers should stay prepared and expect more stringent reporting rules, Ocorian said, which could take effect as early as next year. The consultancy identified five possible changes that may feature in the next SFDR update – including a requirement for more granular information on sustainability factors considered in investment decisions, portfolio characteristics and investment impacts. In addition, Ocorian expects the EU Taxonomy to play more of a prominent role in Article 8 and 9 funds classification, with fund managers asked to demonstrate stronger alignment with the taxonomy. “The concept of ‘sustainability risks’ is likely to receive more focus,” Ocorian said. “Disclosures might need to elaborate on how these risks are integrated into investment processes and risk management frameworks.” More emphasis could also be placed on disclosing principal adverse sustainability impacts and reporting on engagement activities, while existing SFDR categories could be revised or replaced altogether to offer more clarity and comparability between products – a change Ocorian said could be the most disruptive. The commission is expected to announce the amendments to SFDR later this year.
