SFDR: Transforming Data and Technology Requirements

Matthew Gerverun-Pratt, Troy Mortimer

In our latest short video about the implications of the Sustainable Finance Disclosure Regulation (SFDR) for an asset manager’s operating model, Matthew Pratt, Manager in our ESG & Responsible Investment Practice, explores the challenges posed by the regulation for data and technology requirements and outlines what leaders are doing to go beyond the regulatory requirements and set up for success.

What are asset managers struggling with?

While the regulatory technical standards (RTS) underpinning the regulation are very prescriptive on what needs to be disclosed and where, there are still some aspects open to interpretation, which are bringing challenges to managers figuring out their data requirements.

Here are two examples:


Calculating the proportion of investments in an Article 8 fund aligned with the environmental or social characteristics it promotes, and of those, determining which are sustainable investments. While the Level 1 SFDR provides a high-level definition of these, managers need to identify their own characteristics and indicators to support them, ensure these are sourced long before the regulation applies, and make them available in the core tooling of Investment and ESG teams


The absence of a Social Taxonomy means that many funds that clearly promote social characteristics and are rightly Article 8, may come out poorly on data-driven measures such as alignment with the Taxonomy or proportions of sustainable investments. Here, managers may look to define their own criteria for what sustainable social investments look like in the interim period until more standardisation is available

Despite the complexity and the significant data hurdles to overcome, there’s a real opportunity for managers to stand out by coming up with innovative, engaging methodologies and communications while sticking to the remit of the regulation in terms of openness and transparency.

How are leaders responding?

As the demand for reporting only increases, it’s vital that managers have the right foundations in place to meet that demand at scale. There are three ways we’re seeing leading managers transform their data and technology operating models beyond the regulatory requirements:

  1. Capturing demand and supply capability: understanding what metrics clients want and assessing whether your current technology platform can deliver them at scale
  2. Achieving consistency: centralisation, standardisation and mastering of all ESG data to improve efficiency of provision and avoid duplicated datasets
  3. Establishing ownership: clear governance and accountability for ESG data at all stages of its lifecycle, from sourcing, matching, computation through to distribution

This means coordinating lots of different stakeholder groups and getting the right mix of knowledge and experience together to work through the challenges and explore the opportunities.


Get in touch

To find out more about the ESG regulatory landscape and how this may impact your business, please contact Matthew Pratt or Troy Mortimer for more information. 

Are you thinking more broadly about your ESG agenda for the year ahead? Read our thoughts on what it takes to be a leader in this quickly evolving space in 2021:

About the Authors

Matthew Pratt
Matthew Gerverun-Pratt

Matthew works across several workstreams within Alpha's ESG & Responsible Investing Proposition and leads our vendor management efforts for the proposition. His ESG project experience includes helping clients select and implement data providers, define an ESG strategy and prepare for incoming ESG disclosure regulations.

Troy Mortimer

Troy is a Director at Alpha in ESG and Responsible Investment practice with over 20 years experience. Prior to joining Alpha, Troy led the KPMG UK Sustainability and Responsible Investment practice. Troy has worked across all aspects of the asset management and wealth management industries covering both traditional and alternative asset classes including PE, RE and infrastructure assets. He specializes in supporting asset managers and asset owners develop and integrate environmental, social and governance (ESG) practices across all aspects of their operating model and adhere to local and international sustainable finance regulation/frameworks.