The Sustainable Finance Disclosure Regulation (SFDR) entered into force on March 10, 2021, fully implemented as at 01st January 2023, continues to evolve in order to respond to the market questions and fill the gap between regulation and market practices.

On 5 April 2023, the European Commission published its response to eight questions on the interpretation of SFDR that were submitted by the ESAs to the Commission on 9 September 2022. The Commission has also revised and amended its previous Q&A in order to ensure consistency.

Key words for investment managers in 2023 will not only be “inflation”, “FED pivot” and “economic growth/recession”, but also “sustainable investing”. In fact, regulatory environment pushed data disclosure spread and taxonomy is supporting asset managers to increasingly apply ESG analysis screenings. After a tremendous 2022 among financial markets, this year the investment managers could face a more favorable macroeconomic environment to re-enter among equity and bond markets with an enhanced ESG awareness. 

As is now well known, United Kingdom left the European Union in the context of the Brexit act early 2021. One of the main implications of the new regulation is that UK companies cannot anymore approach directly EU customers while doing their fund distribution businesses. 
These companies are now facing the current reality: they lost “overnight” the ability to deal directly with European customers and in many cases, at least temporarily, also the ties with even long-standing customers.

The increasing interest in sustainable investing is reflected in the regulatory framework surrounding sustainability reporting. In this context, FARAD I.M. has developed a unique sustainable analysis service called GreenEthica Sustainable Reporting (GSR). This service targets to deliver an effective, synthetic, and clear sustainability reporting with detailed information on ESG metrics, carbon metrics (CO2 emissions), 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.

Asset management companies revenues are linked to the assets they managed. An environment like the current one with volatile financial markets and high inflation is challenging for such companies as your cost increase while your revenues remain stable or even slightly decrease depending on the type of assets you manage.

In addition, there is a slowdown in the implementation of new projects, which put additional challenges medium terms as important projects take typically months to be implemented. In this article I describe my receipt to succeed in 2023 and invite all the readers to read a “compte-rendu” or debriefing in 12 months from now.

Originally, Within European borders, the regulator has implemented broad directives useful to clarify just the minimum requirements needed to act as a portfolio manager. Over the years, some countries have adopted strict and severe minimum requirements in terms of initial approvals and ongoing checks on asset managers activities, while some other gave them the possibility to have an easier access to the profession and softer obligations to respect and be aligned with. 

Following the worst year ever recorded in the modern financial market history for fixed income investors, and the end of a prolonged period of zero to negative interest rates, we are experiencing an increasing market demand on bond strategies, led mostly by increasingly attractive yield perspective. In the current uncertain market environment, it is crucial for asset managers to avoid potential “bond yield trap” and invest in strategies with an appropriate risk/return profile, especially on cautious mandates.

The Sustainable Finance Disclosure Regulation (SFDR) entered into force on March 10, 2021. In particular, it requires financial players to enrich their investment policy, which must detail how sustainability risks are integrated into investment processes and they will now have to declare the negative impacts of investment decisions on sustainability factors.
In this context, FARAD I.M. developed a unique sustainable analysis service for alternatives, called GreenEthica Sustainable Scoring System for Alternatives,