The European Union’s ESG regulatory framework is the most extensive and detailed in the world and is expected to be the benchmark for sustainable finance legislation across jurisdictions. In a special report, SIX, in partnership with A-Team Group, outlines how your financial institution can reduce the complexity of regulatory disclosures with the help of high quality ESG data.

Click here to download the full Special Report.

The EU’s ESG regulatory framework aims to ensure private money is efficiently targeted to the companies and projects that can achieve the EU’s sustainability goals. With the demand for ESG investments growing at a rapid pace and the requirements of ESG regulations continuing to evolve, financial institutions face a number of challenges, especially with regard to the sourcing of high-quality ESG data to fulfill their disclosure obligations.

As part of the EU Action Plan on Sustainable Finance, the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy require financial market participants to identify which of their investments and activities contribute to the EU’s sustainability targets and explain the impact they have on the world. They are also required to declare the risks that the transition to a net-zero future is likely to have on them and their investments. Similar rules will be introduced for other companies under the Corporate Sustainability Reporting Directive (CSRD), which extends from the Non-Financial Reporting Directive (NFRD).

Key to compliance will be the use and integration of non-financial ESG data into firms’ workflows. The complex nature of that data, however, means that many market participants will experience challenges in gathering, processing and reporting the information that regulators want. New data sets and new insights will be needed for financial institutions to comply with EU ESG regulations.

Overcoming these new data challenges, will bring more than compliance capabilities to financial institutions. Greater transparency into the ESG performance of companies will enable investors and asset owners to identify the huge opportunities offered by a market that is estimated to account for a third of all assets in the coming decade.

With more elements of the SFDR and EU Taxonomy coming into force at the start of next year, it has never been more important for financial institutions to ensure their ESG data capabilities are in place.

Click here to download the full version of our Special Report to learn more about how to overcome the challenges of the EU ESG regulations.