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Effectiveness and comparability as key drivers for sustainability reporting

Though sustainability metrics transparency and data availability are constantly increasing among UCITS funds and liquid investments, market standards within alternative investments are still in a development stage. ESG KPI assessment, GHG emission and PAI analysis, as well as SDG alignment are crucial to provide an effective sustainable analysis for alternatives.

Regulatory framework

After some delays to grant market players to align themselves to the new EU taxonomy, Sustainable Finance Disclosure Regulation (SFDR) Level 2 finally came into effect on January 1st, 2023, starting to require asset managers to comply with “Regulatory Technical Standards” (RTS), to disclose taxonomy-related information needed and to provide periodic reporting disclosure templates for SFDR Article 8 and 9 products. 
On 14 September 2023, the European Commission launched a consultation on the implementation and potential shortcomings of SFDR, in order to assess legal certainty, usability and how it can play its part in tackling green-washing, on the back of the Commission’s realization that SFDR is not yet achieving its main objective of being a transparency and disclosure regulation but that it is instead being used as a de facto labelling regime.

 

Synthetic and effective frameworks for sustainability reporting 

In this context, FARAD I.M. developed a unique sustainable analysis service for both liquid and alternative investments, called GreenEthica Sustainable Reporting, which targets to deliver an effective, synthetic and clear non-financial sustainability reporting with detailed information on ESG metrics, carbon metrics (CO2 emissions), controversies, PAI (Principal Adverse Indicators) as well as a unique alignment to SDGs (Sustainable Development Goals). 
The objective of the analysis is to determine positive or negative contributions of the alternative funds towards sustainability factors and to determine the sustainability impact of the individual companies invested, assessing eventually the sustainability of the entire fund.
Thanks to ESG team expertise, alternative investments are screened to assess whether they are meeting environmental, social and corporate governance challenges, with a detailed SDG alignment analysis both on individual companies and aggregated portfolio, and it provides qualitative comments on the investments in a reliable and objective way.
Among major ESG KPI metrics, carbon footprint (total amount of emissions in terms of GHG metric tons) and carbon intensity (total amount of carbon emission per million of revenue generated by the portfolio) are duly measured and reported in a detailed way, focusing on “Scope 1”, “Scope 2” and “Scope 3” emissions breakdown
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Conclusion

GreenEthica Sustainable Reporting by FARAD I.M. targets to deliver an effective, synthetic, and clear sustainability reporting with detailed information on ESG metrics, carbon metrics, controversies, PAI, as well as a unique alignment to SDGs. The objective of the analysis is to determine positive or negative contributions of the funds towards sustainability factors and to determine the sustainability impact, with a detailed SDG alignment analysis both on individual companies and the aggregated portfolio. GSR provides also qualitative comments on the investments in a reliable and objective way.
If you want to learn more about our sustainable investing products and services offering, please contact CRM@greenethica.eu.

Gianluca D’Alessio
Head of Portfolio Management

FARAD Investment Management

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