All companies have an impact on the environment, both good and bad. Their equities and bonds are owned by investors who will need to report on the “adverse impacts on sustainability” at the entity and financial product levels. These impacts are defined by the EU as “negative, material, or likely to be material effects on sustainability factors that are caused, compounded by, or directly linked to investment decisions and advice performed by the legal entity.”
The EU has identified 64 adverse impact indicators that must be calculated, of which 18 will be mandatory to report, and 46 will be voluntary. They will focus on standard environmental, social and governance (ESG) factors that investors are used to following. The compulsory factors range from carbon emissions, fossil fuel exposure and waste levels (E) to gender diversity and due diligence over human rights (S) and a company’s record on exposure to corruption, bribery or other scandals (G).
While the regulation will formalize the disclosure process, the concept of trying to find adverse impacts is not new. Robeco routinely integrates ESG throughout the investment process, partly as a form of risk avoidance. Under the SFDR, Robeco will start considering negative impacts in the form of disclosable PAIs from June 2021.
Following the framework provided by the SFDR in 2020, Robeco identified datapoints to acquire the necessary metrics, based on data from the S&P Corporate Sustainability Assessment. For each of the mandatory indicators, Robeco has summarized the methodology of arriving at measuring these indicators, and developed a prototype to assess the impact for all of its funds. In the course of 2021, this screening tool will be aligned with the criteria as laid out in the EU SFDR Regulatory Technical Standards (RTS) published in February 2021.
Neither information nor any opinion expressed on the website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, annual and semi-annual reports, which can be all be obtained free of charge at this website and at the Robeco offices in each country where Robeco has a presence.