As regulators stress the importance of ESG considerations, the ESG Disclosure Guide assists in determining the correct way to respond to mandatory ESG reporting requirements under EU law.
The ESG Disclosure Regulation Guide automatically assesses which disclosure obligations a company needs to fulfil to comply with the Disclosure Regulation.
With the goal of integrating sustainability risks in investment decisions, the Disclosure Regulation requires financial market participants, insurance intermediaries and financial advisors to comply with strict transparency and disclosure requirements.
Some of the obligations that firms will need to satisfy include:
- the publication of written policies on the integration of sustainability risks in their investment decision making process,
- making pre-contractual disclosures,
- publishing sustainability investment targets and
- periodical reports and complying with transparency rules.
- The ESG Disclosure Regulation Guide facilitates the self-assessment of the obligations that apply to a certain type of product and market participant. As a result, the tool generates a full report of the identified requirements and guides the user through the implementation in order to achieve full compliance.
The tool’s modular logic contains all applicable guidelines and amendments which can easily be updated to accommodate changing laws and to provide tailored advice to businesses.
Background
The EBA’s (European Banking Association) Action Plan on sustainable finance shows that regulators are encouraging firms to be more transparent and proactive. In an effort to consolidate and expand on existing guidelines, the introduction of the ESG Disclosure Regulation by the EU seeks to harmonize existing provisions in connection with sustainability-related disclosures to investors.
The Regulation imposes requirements on so-called financial market participants (e.g. AIFMs and UCIT management companies and investment firms carrying out portfolio management) and financial advisers (firms authorised under MiFID to give investment advice and credit institutions) in relation to financial products (e.g. AIFs, UCITS). Navigating through these specific disclosure requirements proves to be a time-consuming and onerous task.
Overcoming challenges when building ESG reporting frameworks
Under the Sustainability-related Disclosure Regulation, financial market participants need to disclose the impact of sustainability risks and impacts in their processes and when providing information on financial products.
Looking at the country-specific experience in the EU and abroad, ESG requirements vary from a country to country, which can exacerbate the complexity of work needed to properly assess and report on associated sustainability risks. While the ESG disclosure framework serves as a comprehensive guide to help ensure sustainable economy, it does provide inhouse teams in global corporates with additional work that needs to be automated, to stay in line with regulations. Going forward, as countries adopt unified benchmarks it will be increasingly challenging for companies to address sustainability requirements manually.
That is why companies need to set in place automated ESG processes that will help standardize and address all sustainability-related issues, from investment scoring system, unified benchmarking policies to reporting on ongoing sustainability efforts.
Automating the ESG disclosure process
With BRYTER, law firms can build an automated ESG Disclosure Regulation Guide that determines which disclosure obligations apply and how to satisfy them. To start the assessment, the user is guided through a series of questions relating to the type of product and its characteristics as well as existing index benchmarks. The input determines the scope and obligations a business needs to comply with under the Disclosure Regulation. Due to the open architecture of the BRYTER platform, the embedded modular logic of our business reporting software can easily be amended to account for any changes in the law.
Benefits
Automated & Standardized
The ESG Disclosure Regulation Guide allows companies to auto-assess their business against the EBA’s Disclosure Regulation with regard to their financial products through a standardized process. This ensures a consistent approach and documentation.
Centralized audit trail
Within the ESG Disclosure Regulation Guide, all collected information, advice and next steps are tracked and documented in a centralized audit trail. This allows businesses to prove and document compliance efforts, if needed.
Integrated
The ESG Disclosure Regulation Guide can easily be integrated into an existing IT infrastructure so that users can for example access the tool via a client portal or within their company’s intranet.
Highly customizable
As every application built on BRYTER is customizable, the ESG Disclosure Regulation Guide may contain guidance for market participants of all sizes and can easily be updated to accommodate changing laws.
How it works
Go through Q&A
By clicking through a customizable and user-friendly questionnaire, the user provides all relevant information such as the type of market participant, the characteristics of the financial product and applicable index benchmarks . The user’s input then determines which disclosure requirements apply to the particular business.
Generate assessment report
An assessment report is generated based on the provided information. This report not only outlines the assessment result but also provides the user with next steps to achieve full compliance with the ESG-related disclosure obligations.
Keep up-to-date
The open architecture of the BRYTER platform allows the application to be updated continuously in the background ensuring that the generated advice is always compliant and up-to-date with any changes in the law.