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Broadridge and Ignites Europe ESG Webcast

Preparing for the SFDR Level 2 Rollout.

When the calendar turns to 2023, asset managers across Europe will be greeted with new requirements aimed at improving transparency of the ESG features of their investment portfolios. The Sustainable Finance Disclosure Regulation (SFDR) Level 2 reporting will require companies to report on 18 mandatory principle adverse impacts statements (PAIS), not to mention additional voluntary areas. The result: a burdensome set of rules for which asset managers must prepare.

In our webcast with Ignites Europe our panel discussed how asset managers can prepare for the new SFDR Level 2 roll out and how to be ready for 1st January 2023. Topics focused on where compliance may be most difficult and what asset managers should be doing in order to hit the ground running. Consideration was given to the particular issues that asset managers were having in order to gather data from multiple sources and what the best practice was for collecting correct and validated data.

You can also delve into more detail on SFDR as our panel answered the following queries from the audience:

  • “Where will regulators set the bar for the minimum percentage of sustainable investments for Article 9 funds?”
  • “How does the panel see the dynamics for discretionary accounts?
  • “Once the data has been reported, will there be a “de-facto” minimum standard to retain SFDR 8 status?”
  • “Will figures for Periodic Disclosures reference a specific point in the year or be generated from an annual average?”

You can also discover the response we received to our poll on the following question:

  • “SFDR Preparation: When it comes to SFDR, which of the following areas is your firm prioritizing as it prepares to meet the regulation?”

Our Expert Panel and Moderator

Afzal Amijee

Afzal Amijee
Commercial Director, Broadridge

Graeme Devlin
Co-founder and Managing Partner,
Devlin Mambo

Claire Wallace

Claire Wallace
Director, Risk and Regulatory Practice,
Alpha FMC

Ellie Duncan
Contributor, Ignites Europe

If you missed the webcast, then you can still catch up on all the insightful debate over the regulations by watching the recording of it here.

Watch the Webcast

Video Transcript

Speaker 1 Hi and welcome to ignite your webcast preparing for SFD our level two roll out sponsored by Broadridge. My name is Peter Canova's. We'll get started in just a moment, but first allow me to explain the player on your screen. On the bottom you will see our audio controls. The sliding bar allows you to adjust the volume and the circular double arrows can be used to refresh your media player on top of the video window using a series of taps into any more information about our speakers. Now let me introduce our moderator, Ellie Duncan. Ellie is a financial journalist with many years’ experience covering the industry and will lead today's discussion Ellie.

Speaker 2 Thanks, Pete. And hello everyone and welcome to this ignites your webcast preparing we SFD. Our level three rollout is sponsored by Broadridge. Now European asset managers will be only too aware of the looming deadline for the second phase of the EU. Sustainable Finance Disclosure Regulation, or SDR, is better known. The new reporting requirements will come into force on the 1st of January 2023, so a mere two months away. It's already being delayed by six months to give asset managers time to prepare for implementation. Under SFD on level two, companies will be required to report on 18 mandatory principal adverse impact statements. The aim of the regulation is to improve transparency of the ESG features of asset managers investment portfolios. So, during this webcast, you'll hear from our esteemed panel about what is expected of asset managers under this second phase of SDR, as well as how you could navigate to the accompanying compliance challenges and the steps you should be taking now to ensure you hit the ground running come January. Our panelists are Xcel Energy commercial director at Broadridge. Graham Devlin, co-founder and managing partner at Devlin Mambo, and Claire Wallace, Director Risk Regulatory Practice at Alpha FMC. Now, before we get going, I'd just like to remind those of you watching, send in your questions for the panelists. I'll be asking these throughout the webcast. All questions will be asked anonymously. And today, before we get the discussion underway, we're going to start with a poll question we're asking you, the audience. When it comes to SFD, which of the following areas is your firm prioritizing as it prepares to meet the regulations? So, you can choose more than one of the following five options and maybe its interpretation of sustainability definitions the methodology and alignment of ESG data. Perhaps it's the sourcing of data or internal governance and data management processes. Perhaps it's report production and dissemination. So, make your choices and we'll come on to the results of that poll a little later on during this discussion. Most of all, though, I'm going to come to AB-SOUL for those who aren't familiar with the SFD or Level two reporting requirements, so what is it and who does it affect?

Speaker 3 Thank you. Early morning everyone. Let me start by welcoming all Broadridge clients, partners and friends to the webinar and thank you very much for taking time to be with us this morning. Before we start on what is level two, set your requirements and if you could just please put the slide up on screen. Obviously, as you're aware, there was level one, level one focused mostly on personal principle-based disclosures on ESG related activities. However, level two goes into more detail, and it sort of asked asset managers to give to provide more information on sustainability factors, sustainability risks, and expect asset managers to provide more disclosures around products in an entity level. The goal here is also to tackle greenwashing risks so that, let's say, who does it affect and really any asset managers distributing within the EU or from EU into the UK. Alternatively, all the asset managers who are UK asset managers distributing to the EU also captured under this regulation. In this slide, you'll see. In addition to SDR, we've highlighted MiFID and I requirements. We've done this because it's important to consider these together with the SDR, given the content is very similar and the pivot and idea requirements are prepared by asset managers and delivered to platforms through the European ESG Template ETF. This is really important, you know, both for asset managers and for platforms. Platforms have to ask their clients for their sustainability preferences. And once they know the sustainability preferences, they have to show products accordingly. Or based on those sustainability preferences, which means that asset managers, if they were not going to provide this information through the ETF, some of the products will be potentially left out when, you know, a client searches for funds on a platform in addition to the ETF, which is which is now expected in full, because 580 fields is a lot of data that needs to be collated and sent to the platforms. In addition to that, obviously, yes, FBR regulation also kicks in and the timeline for that is 1st of January, asset managers have to produce really four different disclosures. One is pre contractual disclosure, which is a onetime disclosure. Most has another pending back to the fund prospectus. So that effectively sets the goals of sustaining such a new two goals and objectives. And in addition to that, there is a periodic disclosure, which is an annual report which measures how you're doing against your goals. And there's a website disclosure as well, just the one-time disclosure that you have to have on your website. Finally, on June 2023, asset managers are going to be required to produce the principal adverse impact statements which captures negative impacts of their investors investment decisions on sustainability. So that's really a high-level overview of, you know, who as a PR advice to what are the disclosures one has to provide. And in addition to that, the ETF, which is integral part of providing ESG data to the platforms.

Speaker 2 All right. Thank you so much about for the kind of setting the scene there and providing quite a bit of detail. And I know that we already have a number of questions coming in from the audience actually on a few kind of aspects of of this second phase. Just obviously, we'll try to come on to as many of those as possible. But Claire, I was just wondering if you could take one of the audience questions for now, just for kind of clarification, really. They've asked and, you know, reporting on all sixteen plus two, they've said they believe it. That's just for Article nine funds. Article eight funds will have to report on those points it uses to promote sustainability. Is that your understanding? So, could you kind of unpack that a little bit for us and just clarify that, please? Sure. Of course. And I'm sorry if I understand the question correctly. So, the API, the mandatory APIs that that you have to perform. So, they do apply to both articulate in Article nine. The difference with articulate is it applies to the proportion of the fund that is making those sustainable investments. And so that's my understanding. And Greg, I don't know if you would add anything to that.

Speaker 4 Though. It's also my understanding is well, clear. And so just in to listen to that proportion.

Speaker 2 Right. That's very helpful. Thank you. Look, um, Claire, just. Just staying with you for now. What are some of the biggest challenges that you see your asset managers, client manager, clients facing when it comes to meeting these new reporting requirements? Yeah, I think there's a number there's Ellie. I think there's some of definitional challenges to how you define sustainable investment is quite controversial and there are some different methods that we're seeing and sort of across our clients. And I guess what that that means is how you then define it, the framework you have behind it. And ultimately that could be quite opaque or not very clear to the investors at the end to actually how can they compare at BlackRock to a legal and general sustainable investment and understand the definition? So, there's a definition definitional point and I think the really the biggest challenges are in data. So, in terms of solutions, as you mentioned, the guiding principle address impacts and the sheer amount of data that you have to have and that you have to collate and consider and sort of deal with within your legal entity is massive. And I think that's a real challenge for people, let alone before we start reporting on that and trying to collate, I think trying to source it in the first place is very difficult. Mm. Yeah. I think that's something we'll will be able to gauge from, from our poll as well about how much of a challenge that is when we come on to see the results of that. Graham Anything you want to add to what Claire's just said there?

Speaker 4 Either there's three points to being clear and particularly touch on one of them, which is obviously data will come back to that. But and as it's in the throes of regulatory submissions at the moment, I mean, you've got this is all about disclosure. So, you can start to play with it and your principal investment impacts are indicator. So, if we're looking at timing and regulatory submissions required for the contractual document and the prospectus, and this requires some more quantitative measures, for example, the percentage of sustainable and minimum sustainable investments. Now, this is a number of which and which firms need to have a really good understanding of what this means going forward in terms of approval and signoff and how that can impact their ongoing and ongoing interaction with the class, essentially. So that number is something they need to stand behind from the government's perspective. So, ensuring that you have comfort with those numbers, ensuring that they are able to be submitted in time to be and to be approved by the regulator. From that perspective, submission for pre contractual is really important, but also balancing that off the document as well. So, if you do, it would take on them any other changes that require this is a time critical point to ask the right things as a challenge. So, ensuring that you've got the right data and the right understanding for your portfolio, it's integrated really puts it at this point. So again, it's one of the biggest challenges since that balancing.

Speaker 2 Mm Yeah. And so would, would you agree with that. So are you seeing anything different?

Speaker 3 No, I think absolutely. Claire and Grandma spot on. I think one thing to emphasize that what we see from clients, there's a huge amount of efforts needed to get the SFR reporting, internally organized processes, governance and as you know, as well as gathering the data. But you know, the additional point that we see, you know, from discussing with our clients is that the time now that the timeline is 1st of January, there's really only a couple of months away. And you know, the pre contractual and periodic, it's the template and the templates, you know, have a prescribed questions focusing on those. Now so much effort has gone into collecting the data. I think the effort needs to shift a little bit on the reporting, getting the disclosures ready, making sure that they're Aligned, that consistent, and then getting those out, you know, to the platforms and, you know, to clients effectively. I think the time it takes to get the disclosures should not be underestimated.

Speaker 2 Right. Okay. Thank you. I saw some really good points there about the fact that, you know, it is only two months away. And Graham, did you want to add to that?

Speaker 4 Just one quick point. I want to be very we don't want to slip under the radar and periodic reports in full SFR starts from the 1st of January. If you've got funding events from the success of September, you will need to complete periodic reporting. And within that that name didn't report in accounts so as one to once to be very aware of them. And they'll be something with the data you've collated over the previous quarter this year. So is one to once it's like an answer requirement potentially for some forms in January.

Speaker 2 Right. Thanks for flagging out because I think we've had a few questions relating to that from the audience so far. Hopefully that's clear things up for those that that were unsure. And as you will, we'll stay with you for now. Graham what do you see as the particular issues that arise from asset managers having to gather data from multiple sources which is what they have to do, of course, isn't it?

Speaker 4 And this is an interesting topic. And I think obviously when you look at it and there's a number of different ways you can go, as you can see in history soft but in Reality you use a solutions provider does not say that in the market and we've recently launched our product which is essentially to compare the market for these solutions. You can apply here your visa rating agencies also into your fintech insights, you 50 over 45 and within that methodology, the firm coverage that forms are always going to be a challenge at the moment for us, there's no consistency. So, when we look at goods and services and in face of challenges, there's always going to be a problem with some firms making sure that that's inconsistent for their teams to use. But multiple sources, we believe, are going to be the norm and probably with some element of proprietary overlay as well in his research. So, I suppose what does this mean? And this is a key challenge, probably the key questions, how do you explain your methodology clearly to your client prospects, what your sources differ from that? So, one of the key challenges we see is normalization. So how you operate in a consistent manner and variable success is differences, but again, how you ensure that all your products are managed and then in the same way consistently and then on to that. So, you communicate that to your and so your clients address these differences.

Speaker 2 That communication point is really interesting. Thanks, Graham. I'm sorry. All seems like a good point to bring you back in. So, I know that Broadridge obviously works with a number of asset managers. So can you talk a little bit more about this kind of data gathering from multiple sources, not only that, but obviously being able to communicate that to clients, of course.

Speaker 3 Yeah. I mean, as Graham mentioned, you know, gathering data from multiple sources is one of the risks that, you know, most asset managers would have. It's around consistency and so validating that data. So, where we work very well with our asset managers in partnership is we have tools and processes which allows us to get all the data and prepare the templates for that, for the managers, asset managers. And when we do that, we validate data. So, for example, if the data, you know, a data point in the ITI says X, whereas in big contractual says Y, we'll pick that inconsistency out, you know, for our partners. So, we actually, you know, produce the templates, you know, for the asset managers, we will validate the data in the template. There is additional element of translation. A lot of this information has to go across borders given that the new products are being distributed in different markets. So, we offer translation services in tandem whilst the composition is happening for pre contractual disclosure or periodic disclosure. And that's a challenge a lot of people don't consider in terms of right at the end we do this in sync. So that helps hugely in terms of time management and efficiency and finally distributing to the platforms is Broadridge has it's a vast network, it's automated, we have scale, it can deliver information very quickly and on time. So yeah, absolutely. It's a huge challenge for asset managers and we are really here and working with a number of asset managers now in getting to what they need to do by 1st of January.

Speaker 2 Right. Thank you. And it seems like a good point at which to check out the results of that poll we ran at the very top of the webcast. So just to remind those of you who perhaps didn't catch it, we asked when it comes to SDL, which of the following areas is your firm prioritizing? As it prepares to meet the regulation. So we've got some great results and really insightful, but I think probably revealed that actually of all the possible kind of five answers, we've got a fairly even split anyway between them. So around sort of the 20% mark voted for interpretation of sustainability definitions, slightly higher, 21.2% said methodology and Alignment of ESG data. And then again 20% said report production and dissemination. So, it was slightly less of a priority was sourcing of data. That was something that 19.4% of people voted. And then internal governance and data management processes came in around 18.7%. So yeah, as I say, a fairly even split. But Claire, perhaps you can comment on kind of what that tells us about what firms are prioritizing at the moment. Can you kind of give us your initial reaction to those responses? Yeah, I mean, it's not surprising. I think everyone is sort of I thought with data one might be slightly higher if I'm honest, but I guess that is just reflective of where people are with the challenges. And these are old challenges. So maybe it's a case of picking taking the biggest pain point at the minute for people. And I think given where we are in the cycle, you know, we're two months out to go live contractual and update some perspectives will be getting filed with this here at the CBI. So, there's going to be a lot of focus on trying to get the data in and get things right before we then turn to the next stage once we tick past January. And yeah, I think it's in line with what I certainly see across my other clients and in terms of the challenges. Yeah. And Graham, is that the same for you? Would you say that those results sort of Alien with what you've heard from asset managers.

Speaker 4 And lot of. I'm not surprised. The challenges are rife at the moment. And I think, again, we've spoken of challenges with data as important as challenges, and it was clear and sensible reporting. And that's important if you look at internal governance is a fundamental tool to produce the right numbers to allay your underlying investors to understand what's going on with a number fully. So yeah, I, it was hard to pick one from the list personally. And they all they all feel equally important.

Speaker 2 Yeah, absolutely. And Afzal, I think the one that came out on top, I guess, was methodology and Alignment of ESG data. That's something we've already touched upon. But what about internal governance and data management processes that seem slightly lower down the list of priorities? What are your thoughts on that?

Speaker 3 I think, you know, given SVR reporting is new in a lot of the asset managers, the projects started in the front office or in the special projects team and now they're being, you know, moved towards the back office. And as that happens, obviously back offices are already doing a lot of regulatory reporting. So, there's more pressure coming on to the back office and I think processes are going to get more refined over time. So, I think we are seeing that's the beginning of as business becomes SFO reporting becomes business as usual. I think you'll see more emphasis on that. In addition to that, you know, as it moves to the back office, the next step will always see, you know, how do we gain efficiencies, how do we optimize processes? And this is where, you know, for most asset managers trying to focus on, you know, the high value, what is the core that they need to keep in-house and what is the, you know, the tasks and processes they can outsource. So, it's a it's a great point to review all the processes and seeing, you know, where can we gain more efficiencies by working with partners? So, it's. I'm not at all surprised.

Speaker 2 Mm hmm. Well, let's come on to actually another question from the audience. And it's something I was keen to ask the three of you as well as regards the EU taxonomy. So, the question we've specifically had from one of the audience members is how does SFA deal reporting now linked to the taxonomy given the different effective dates and the fact that the taxonomy isn't yet finished? And I guess what I'd add to that is, you know, if firms are kind of Eloigning SFD on level two with the EU taxonomy, we can assume perhaps they are and maybe it's be interesting to explore the implications if they aren't. But Claire, let's come to you first on that. And yeah, I think so. It's a really interesting one. I think it's one that firms are struggling with because the commission has been very clear that if you if you don't have the data and you can't verify it, then you should report 0% Alignment to the taxonomy, which obviously makes people feel quite uncomfortable, I think, because they and they feel they are. But some of the data is lacking and it's struggling with some of it. So I think it is, it's, it's about where can you be sort of set yourself honestly. And we held as an internal round table with a number of clients a few weeks ago, the majority who didn't feel they had the data we're following that. So they were going with 0% Alignment and even that those that did feel they could report that the numbers were going to be very low because it's just it's just too news, isn't it. But Graeme, I don't know if that chimes with your experience as well.

Speaker 4 I, that doesn't mean you take it back, I mean the whole point of the taxonomy was to drive full substantial into some more sustainable investment and the definitions of problem. So for what is sustainable investment uncertainty. So I mean, this is where we can't get the data to Align. It's a real challenge for managers, especially if you're not combining and you have a very low percentage or a that makes it very difficult to see and to be able to and discuss that with your client base as well. And I think from the client perspective as well, I think this is all about communications and the sort of process, process, and it's good to get better oversight. And then I think we need to be consequences of that as well. But again, this is a challenge and one that the firms are struggling.

Speaker 2 Okay, thanks. Thanks for taking that audience question, both of you. And actually, I wanted to come on to another audience question. This is kind of going back to talking a little bit more about the data aspects of things. So perhaps you can tackle this, which is another the question that simply says what does kind of getting the data right actually mean in practice? So yeah, I guess what is what is best practice when it comes to the data collection in your view then?

Speaker 3 So obviously it's in addition to what Graham and Claire mentioned about definitions, first of all, is making sure that, you know, there is clarity over definitions. And once you have that clarity, then getting the data where we've seen issues come up in terms of gathering the data is where then a fund has portfolio companies. The portfolio companies are spread across the globe, some of them under different jurisdiction, and they don't report the same ESG data as a company or perhaps in Europe. So effectively you get into this data gap situation and that makes it extremely complicated. What do you do then? Do you get data from a third party source? And there's a number of data vendors who provide data. And then if you are to do that, each data vendor calculates the data slightly differently. It's making sure that the methodology is Aligned with your fund's objective and getting data from different sources. Then it's Aligning the methodology. So there there's a lot of complication in terms of getting the data and, you know, putting that data into disclosures. And really what we know we are sort of seeing is consistency and comparability will become increasingly important across a number of disclosures. So that's really what we're seeing at the moment.

Speaker 2 Richard, thank you so much for taking that question. We've also had another question, which I think Graham is probably well-placed to answer. In fact, we've had more than just another question. We've had a lot of audience questions. So as I say, we'll do our best to try and tackle as many of them as we can. But yes, this audience question, this audience members are asked, where do you think regulators will set the bar for the minimum percentage of sustainable investments for Article nine funds?

Speaker 4 And it's always a debate, isn't it? I would think about safer, smaller companies funds who predominantly invest in smaller companies. What's predominant is this 70% is 80 is 90, and we've never had the regulator set thresholds for that. Now we're in a slightly different and so different field here. So I think that the regulators are going to set the minimum. No, I think probably the clients model is acting for a fund whose goal. So I think is having a good understanding. And in terms of your client base, I'm going to get to understand the market in your future and that should probably dictate what the minimum percentages both expect and Reality for us in article number and asking funds is as it should be, relatively high.

Speaker 2 Claire, would you agree? I mean, anything to answer that either way, I guess, in terms of the Alignment with the taxonomy. Yes, I think that's absolutely spot on. Mm hmm. Great. Well, look, as we've mentioned a few times already, the deadline for the roll out the phase two is looming just a couple of months away, in fact. So given that looming deadline, Claire, what should your asset manager clients be prioritizing in the time that's left? Three now on the 1st of January next year. I mean, I think the key thing is ensuring that you're ready to meet the regulatory deadlines in the first January in terms of your pre contractual. And so I'm sure everyone is and the prospectuses are drafted and written and going through approval processes. But I think that that's really, really important for what they need to be doing now. I think it's been turning their attention, as we've mentioned already, to the period of reporting to PI statements and to make sure that you have the data that you can sort of pull those together. And I think I think there's been something about making this happen every year. So rather than just being a huge project that involves teams and teams of people getting into the line meeting to ensure that that's built into the new processes that you build in relevant flags and free trade screening, whatever it might be, your own PIs or investments, and to make it so a very controlled process on an ongoing basis as well. So there's a lot of effort going into this initial one that does need to build into a bigger process over time as well. Okay, great. And as well, anything you think your asset manager clients should be prioritizing at this stage? I mean, obviously, our poll kind of showed that perhaps everything is a priority. But. Yes, what do you think?

Speaker 3 Yeah, I mean, it's we already seeing this. You know, when we speak to clients, it's the focus is moving from data to communicating that data out now and you know, making sure as they complete the pre contractual disclosure there are questions around what does this actually mean. So it's really defining making sure that the information provided in one disclosure is consistent with another disclosure and so forth. And just, you know, communicating that message succinctly and as transparently as they're able to do under the guidance. As Claire and Graham mentioned, there are still definitional issues which, you know, we're waiting for answers. But given that, I think the regulator have also said where you don't have a full answer, we will accept the proxy answer to, particularly for PI statements. So I think it's just getting sort of grip on everything that all that information coming through. And particularly given, you know, most asset managers have hundreds of, you know, some funds and funds to, you know, to address making sure that reporting, you know, functions, as Claire said, business as usual says a lot of process related challenges. But they need to address and as I said the time although we're saying two months really December is holiday period. So it's really say 4 to 6 weeks we're looking at now. So it is it is highly urgent, you know, to just really get that process started and think about what will the end, you know, disclosure look like and does it, you know, is it Aligned with our objectives and so forth? So it's very much it's. Action. Now, Roy, you know, and I'm getting these reports out.

Speaker 2 Yeah, absolutely. As you point out, you know, and perhaps in Reality, it's more like 4 to 6 weeks and then to four months away. And look, I want to bring in at the stage another audience question and come to Claire and Graham for an answer. So the question is, the focus is now on full funds. How does the panel see the dynamics for discretionary accounts? And Claire, do you want to take that first? I'm sure. So I'm guessing by discretionary accounts, she means emails and segment accounts and they are in scope of SVR and they always have been as well as the pooled funds. I think in Reality the approach is slightly different and technically only actually applies to two new SEC accounts that resigned after the 10th of March or after whenever one came in. And what we find in practice is some people decided to categorize their existing mandate. Some didn't. But what we did need to do is any new SEC accounts would need to be a process. We need to be bold that they could classify the product. Obviously, the pre contractual reporting is different because you don't have a prospectus, but you do have certain information that you provide them on your method ahead of signature and that you would expect that information to be included in. And then the same on this, that periodic reporting is different. It's not it's not a funds. You don't have the annual reports in the same way that you typically agree with the clients. So we are seeing people do it, albeit with probably less of a focus, if I'm honest, because the funds businesses is bigger. Yeah. Graham Anything to add? There's obviously a few important nuances that the Clare delved into.

Speaker 4 To be honest, there's covers everything with aplomb. So I really I will sit back from this one. Thanks. Clare.

Speaker 2 That's fair enough. Well, look, perhaps in that case, I can ask you to answer a slightly different question from the audience. So they've asked once the data is reported. At this stage, it doesn't appear that there is a minimum Alignment level to retain SFO deal status. What is the panel's view on this? Do you think there will become a de facto minimum standard? Graham UK To tackle that one.

Speaker 4 I think whether it's a regulatory driven or client driven, I think it will fall into that. Lots of caution and not that the concern about commercial considerations if you're looking at a minimum percentage. If you look at a period of analysis, if you're looking at all those good things that your and your distributors will be chance to make an assessment and I will that that product to fit into a portfolio. Then again, anything with a sustainability focus. Will drive an element of that decision making as well. So I think that will be as it tends to be, there's a bit of a collaborative move to potentially the slightly higher level, but I don't think it's going to be regulatory driven. I think it will be more into that and into the client side.

Speaker 2 Do you want to add something on that? Yeah. And I think, you know, we saw it when we had level one kick off that, you know, we had those teachers threatening that they would only sell products if they were actually or Article nine, like Article six would net wouldn't be sold anywhere. So I think things point to try, I think will be driven by the market sentiment. I guess the danger with that is that people rush to label or patients thousand something because they want to have a disputation. That means then no, actually meet the investment process that they have behind it. So I think the really important thing is it sort of being true to who you are as a firm that ensuring everything as we've talked about ties together, investment process supports, which way you are and that you can justify where you are. But I think we'll certainly see the push to have the higher numbers because it seems to be a nature thing of people just wanting one thing, the highest one that they can. Well, thanks, both of you for taking that one on. And look, we keep mentioning this 1st of January 2023 deadline, but it's not as if that was the only deadline that asset managers have to think about at the moment. There's plenty of other regulatory deadlines and other legislation that's coming up. So perhaps it's important at this stage of the webcast to kind of take stock about what else is on the horizon going into 2023. So, Graham, maybe you can kick us off here. Yes. One of the other important dates or deadlines that asset owners just need to be aware of in relation to or impacting SFD for next year.

Speaker 4 Is that if I take the impacting SFD, there's a couple of things going on in the market movement. Then we can see if it suits this ability and we'll see a sort of drive from some of the opportunities to kick in and firms have to really step up to those requirements to build sustainability practices and the suitability process. And again, from a distribution perspective, this is a sign, it's a step change in push. Clients know their team will be able to supplement that decision making. And for the voice of the world, which is pretty close, help us get into that quantitative step from there is quite important, but there's also product governance aspect to this as well. So, Heidi, bringing stability and to into product governance and you integrate that and then within your own process. So there will be a focus on that risk, of course, consultation which comes within in the absence of coming down the line. So certainly something to consider and within that safety space and one other aspects and. I know this is a this is not an SDR webcast, but you have the UK with the sustainable disclosure requirements released last Tuesday in consultation and the risk divergence between the UK and UK as it starts cruises and it feels like there will be a higher standard for articulate funds and you do want to sell into the UK and the labels will be difference if you have and cross towards our products. So we want to be really aware of and this should be the market within the UK market.

Speaker 2 Hmm. Yeah, that's a good point. Claire, is that something that you're kind of advising your asset manager clients to kind of be a bit cognizant of? Yeah, definitely. I think, you know, most people will have as a matter of funds, you will have onshore and offshore funds and the regimes don't Align. So you will have the same strategy with different labels. And you need to think about obviously that the UK stuff doesn't kick in until June 20, 24 at the minute and then once it clears, they're not misleading, it kicks in next year, but you'll need to build your processes to effectively for the same to the same assets and the same strategy. To give you two different answers to how you build the whole operating model around that, I think will be a challenge and one that firms you make sure they think twice. Mm. Yeah, absolutely. So just coming to you on this, any other key deadlines or dates in relation to SFD or next year that that we haven't kind of covered already that are really important.

Speaker 3 I think in terms of SFD are covered, you know, the major ones and Graham in addition mentioned SDR as well as CAA bringing the legislation in. However, there is TCFD which is already in play. You know, assets, asset managers managing assets over of greater than 50 billion have to produce this TCFD statement, which is an annual report on climate and the ESG related sustainability factors, risks, strategy, targets, etc. So that's already in play, and asset managers who are managing assets below 50 billion will have to produce a TCFD statement in 2023. So, this is in addition to SVR. So that's something that, you know, a number of our clients are already doing. So, however, that should also be it's sort of related, but, you know, come to the different sort of regulation. But it's also important to mention.

Speaker 2 Yeah, absolutely. Thanks. Thanks for that. And there's one more question that's come in from the audience, which I think is probably worth addressing. Before we closed today, they said on the periodic disclosures where the questions require an actual figure, e.g. actual level of SLA in the portfolio. How would you decide if this data point should be taken at a specific point in time or whether you would need to average over the year? Claire, Do you want to answer that one? And I think. I think it's adds at a certain date from memory. I don't have the text in front of me, but I think it's at a certain point in time rather than I take the points by it. It could be misrepresentative, but I'm guessing actually thinking that these indicators, they probably wouldn't necessarily vary massively throughout the years. So, I think it's a point in time, but. Graeme, what would you think?

Speaker 4 Think I'm going to confuse myself, as always, between those saying there's four points to take the and it's like I said, the beach quarterly and the metrics. I think you're right in terms of the full year level. So again, it can lead to an easy 2 to 1 to go manipulation. But I think I think the expectation is that it's clear that this doesn't move particularly frequently and if it's so to say, doesn't look great from the China reports. So, again, it's not going to it's not going to be something that I would expect, which should be a particular issue, movement of that number. But again, I can't remember if it's if it's at the end of this course or if it's not the point into.

Speaker 2 Yeah. Okay. I appreciate that. Was quite a specific question. Would say thank you both of you. And hopefully that's helped. Another question that's also probably worth covering before we finish for today and maybe so we can come to you on this first. For the financial statement reporting, are you expecting a standardized reporting template for your reporting?

Speaker 3 Sorry. The question was for financial statements reporting.

Speaker 2 Yes. Yes. That's how it has to be worded. Are you expecting a standardized reporting template for SFO reporting?

Speaker 3 So for SFO, ah, they are for the pre contractual and periodic disclosure, there is a standard template so that that particular disclosure needs to be appended to the fund prospectus or to the annual report. So, I hope I'm answering the question correctly. So, there is a template for that? Yes.

Speaker 2 Okay. Great. Yeah. Anyone else want to add anything on that? I'm sure you are answering that question correctly. Graham. Is that as far as you're aware, there is a template?

Speaker 4 That's correct. So, it's the annexes that came out. So, there is still no I believe there's no further briefing on that. So, what size there would be what you see reported?

Speaker 2 Great. Well, look, thank you so much for taking my questions. But the many audience questions that came in today for you, that is all we have time for. I think we could probably easily run on for another 45 minutes and go on answering audience questions on my own. But unfortunately, we have run out of time. So, all that leaves me to do is thank our panelists, of course. So, Claire and Graham for joining us today. And thank you for watching. I'll hand back to Pete.

Speaker 1 Thanks, Ellie. And just echoing Ellie's. Thanks to everyone for attending today's webcast as well as to our panelists. Absolutely. Graham and Claire, as well as to you, Ellie, for moderating. And finally, a very big thank you to Broadridge for sponsoring today's webcast. Please check your email for information regarding Future Webcast series and the recorded archive for this one. Thanks everyone and have a great rest of your day.

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