SFDR Reporting Requirements
SFDR applies to Financial Market Participants (FMPs) that offer financial products domiciled in the EU. According to Article 2 of SFDR, FMP means:
(a) an insurance undertaking which makes available an insurance-based investment product (IBIP);
(b) an investment firm which provides portfolio management;
(c) an institution for occupational retirement provision (IORP);
(d) a manufacturer of a pension product;
(e) an alternative investment fund manager (AIFM);
(f) a pan-European personal pension product (PEPP) provider;
(g) a manager of a qualifying venture capital fund registered in accordance with Article 14 of Regulation (EU) No 345/2013;
(h) a manager of a qualifying social entrepreneurship fund registered in accordance with Article 15 of Regulation (EU) No 346/2013;
(i) a management company of an undertaking for collective investment in transferable securities (UCITS management company); or
(j) a credit institution which provides portfolio management;
In case your organization fall under any of the definitions above, SFDR will apply to you.
As per Article 7 of SFDR and the Annex shared in the SDFR RTS Final Draft, FMPs will be required to disclose their PAIs as part of the level 2 requirements.
In 2023, Financial Market Participants will be expected to disclose on the 14 mandatory indicators, including two specific to Real Estate. The regulatory technical standards also provide two tables with voluntary indicators of which a FMP needs to pick one of each. This brings us to a total of 18 indicators for Real Estate and 16 for Infrastructure.
In case FMPs do not take into account the PAIs (Article 6 products), they don’t have to disclose a PAI Statement under Article 7.
The EU has not provided guidelines on the quality of estimates. However, it has stated that estimations will be allowed for disclosure purposes, at least in the near term.
Where needed, GRESB will use estimates based on our dataset that consists of over 117,000 assets to fill gaps in data coverage and, consequently, provide members with an accurate picture of their environmental footprint. GRESB’s extensive database allows us to find comparator assets at the country- and property-type levels. This is rather unique to GRESB, and it means that from the very beginning, your SFDR reporting statement will be more accurate, even if you need to rely on some estimated data.
Note that data quality aspects are likely to come into force with CSRD (the Corporate Sustainability Reporting Directive), which could potentially influence which data points are acceptable.
GRESB SFDR Reporting Solution
The GRESB SFDR Reporting Solution is primarily focused on helping fund managers collect and ultimately disclose their PAIs. Should they wish, fund managers will be able to share their data with investors in 2022.
GRESB is open to feedback as to investor needs when it comes to SFDR.
There is insufficient clarity from regulatory bodies on whether Real Estate entities will have to report on all mandatory indicators in Table 1 or just those highlighted as specific for Real Estate Assets. We expect this will be made clear when the final regulatory technical standards are released.
For the moment, GRESB is including PAIs from all 3 tables, including those specific to Real Estate those applicable to investments in investee companies. For indicators in tables 2 and 3, entities can report on the one from each most relevant to them.
For Infrastructure, assets and investments are considered to fall under the ‘Investments in investee companies”.
The methodology for calculating the PAI impacts for Infrastructure funds and Real Estate Portfolios are different so it will be down to the participant to decide which of the SFDR assessments suits their needs the most.
GRESB’s SFDR Reporting Solution will focus on Article 7 of SFDR, which is mandated by the Regulatory Technical Standards (RTS) and is part of level 2 disclosures.
Insights from GRESB’s SFDR Reporting Solution may be used as a baseline for other level 2 disclosures, such as Article 11 – Periodic Reports.
Given the ever-changing regulatory environment, GRESB watches for any updates to the PAIs. Currently, the GRESB SFDR Reporting Solution uses the latest version, released in April 2022.
GRESB’s solution for PAIs will be the same for Article 6, 8, and 9 funds.
Regarding the reporting requirements under Article 7 (PAI Statement), this only applies to Article 8 and 9 funds; however, GRESB will also allow Article 6 funds to participate in the GRESB SFDR Reporting Solution.
For SFDR reporting, the GRESB Assessment already captures some of the quantitative environmental data, such as GHG Emissions, Energy consumption, Water consumption, and Waste. Other qualitative metrics for SFDR will require new data to be collected.
For Real Estate – focusing on reporting efficiency and with the aim to reduce reporting burden, the same Asset Spreadsheet used to report quantitative metrics for SFDR will be reused for the main GRESB Real Estate Assessment purposes.
Note that different validation rules will apply.
Members that report to both SFDR and the GRESB Real Estate Assessment will only have to submit asset-level data once. The GRESB Asset Spreadsheet will be used for both SFDR and the main assessment, and data uploaded in the Asset Portal will be ready to populate both assessments.
No, although reporting and gathering data on the PAIs via GRESB can indirectly help with that transition by providing our members with a more accurate picture of their environmental, social and governance indicators and metrics.
For the time being, GRESB’s SFDR Reporting Solution will not validate the data provided by participants, as reporting is not currently subject to validation. GRESB has created the platform so data can be validated – similar to the GRESB Assessment – if and when it becomes required by regulators
You can find a sample report and more information on our product page: gresb.com/SFDR
The GRESB SFDR Assessments are independent of the GRESB Real Estate and Infrastructure Assessments to enable year-round reporting.
The 2023 SFDR Assessment reporting will run from Q1 through Q4, 2023, and will facilitate reporting for the ‘2022 reference period’. As reports are not dependent on human validation, scoring, or benchmarking, they can be generated as many times as necessary by the participant member.
As a reminder, the GRESB Assessment reporting period opens April 1 and closes July 1 and does not include all necessary information on mandatory and optional Principle Adverse Impacts indicators, whereas the GRESB SFDR Assessment will include these indicators.
We have created a mapping document where data points that match between the GRESB and SFDR Assessments are identified so participant members can easily transfer information from one assessment to the other. This can be found in the appendix of the Infrastructure Asset SFDR Reference Guide.
We are also working on an automated data transfer functionality for Infrastructure Assets, where information from Principle Adverse Impact Statements can be transferred to the GRESB Assessment and the other way around.
For the first iteration, investors will not be able to request access to participant SFDR reports directly via the GRESB Portal. However, SFDR Participants can share their reports with investors outside the platform if they wish to do so.
Investor access requests for SFDR are currently under review for 2023. If sufficient interest is expressed, we will offer investors the option to request and access their participant member reports via the Portal (similar to the GRESB Assessments). Participants would still be able to accept or deny these requests.
The Real Estate Assessment currently allows investors to access asset-level data (dependent on participants permission) through the Asset Analytics. This will not directly apply to SFDR, as we will only provide aggregated performance metrics and fund-level indicators in the Data Exporter.
However, please note that the same asset-level data used for SFDR purposes will be reused in the GRESB Real Estate Assessment. Therefore, where a participant reports both to SFDR and the main Real Estate Assessment, investors will have access to this data.