MSCI launches SFDR tool

By ESG Clarity

MSCI has expanded its toolkit to help investors meet the requirements of the European Union (EU) Sustainable Finance Disclosure Regulation (SFDR).

Building on the MSCI EU Sustainable Finance Module launched in February 2021, the new resource will support investors in meeting their regulatory needs by providing data on issuers, indices and funds as well as portfolio analytics.

The full toolkit includes:

• Issuer-level data: Full transparency into issuers’ SFDR metrics for over 10,000 companies and 175+ sovereign issuers or countries.
• Regulatory reporting and portfolio analytics solutions: Newly released scalable and robust MSCI reporting capabilities, allowing investors to manage risk and choose from standard or fully customised reports at their product and/or entity level.

• Multi-asset class coverage: Investors can access detailed SFDR data across asset classes for more than 700,000 global equity and fixed income securities across 14,000 total issuers. Investors also have the option to incorporate metrics on exchange traded and over the counter (OTC) derivatives.

• Index-level metrics: Access to SFDR metrics for 6,000+ MSCI indexes, including equity and issuance-weighted fixed income indexes as well as Market Cap, ESG, Climate, Factor and custom indexes, for reporting purposes.

• ESG fund-level metrics: Later this year, investors will be able to understand how funds are classified, based on Article 8 or 9 sustainability and underlying flags, and report on fund-level holdings in their portfolios using MSCI ESG Fund Ratings. This will include MSCI SFDR Adverse Impact Metrics and MSCI EU Taxonomy Alignment metrics for approximately 53,000 equity and fixed income mutual funds and ETFs globally.

Phase 1 of SFDR was introduced in March 2021 requires all financial market participants serving EU investors to consider sustainability risks and make sustainability impact disclosures at the organization and financial product level.

See also: – Podcast: MSCI’s head of ESG on piling on net-zero pressure

Products must fall into three distinct categories. These are:

• Article 9 funds: those funds that specifically have sustainable goals as their objective (for example investing in companies whose goal it is to reduce carbon emissions).
• Article 8 funds: those funds that promote E or S characteristics but do not have them as the overarching objective.
• Article 6 funds: funds that are not promoted as having ESG factors or objectives.

 Jorge Mina, head of analytics at MSCI, commented on the new tool: “We understand the challenges that come with a regulatory change as bold and wide-reaching as SFDR. This launch is part of our efforts to help investors manage risk and meet regulations through standard and customisable solutions that can be applied across their multi-asset class portfolios.”

Last week, the European Union delayed the second phase of SFDR by six months. Phase two of the ruling requires additional detailed entity and product level 2 disclosures, including the “principal adverse sustainability impacts statement”. This was set to apply from 1 January 2022 but has been pushed back July of that year.

See also: – MSCI launches tool to help investors align portfolios with UN SDGs