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Asset managers largely in support of SFDR, although concerns remain

News Team, 29/04/2021

A new survey by IIMI, the boutique asset management think tank formerly known as New City Initiative (NCI), revealed that over three quarters of its members believe they will benefit from complying with the European Union (EU)’s Sustainable Financial Disclosure Regulation (SFDR), which came into effect in March.

The full results of the survey, which was conducted among IIMI’s membership to gather their views on the SFDR and how it will impact their firms and the wider industry, are included in IIMI’s paper Regulating ESG: A step in the right direction”.

Key highlights from the paper include:

-61 percent of respondents believe that the SFDR will improve competition in the asset management industry, while 22 percent feel it will have a negative impact

-Some members feel the rules could disadvantage boutiques as the supplementary costs will be felt disproportionately

-Some members are calling on EU regulators to cap the amount which data providers can charge for ESG research and analytics, in order to create a more even playing field between boutiques and larger firms

-66 percent of the membership have already integrated ESG work into their investment teams’ processes

-Over a quarter (27 percent) have decided to hire ESG specialists specifically to deal with the new regulations

-There is particular uncertainty around ‘Article 8’ designation, which IIMI is calling for clarification on

Nick Mottram, chairman of the recently rebranded Independent Investment Management Initiative, said in a statement: “As scrutiny around ESG in asset management continues to grow, this research suggests our members largely believe SFDR can be a force for good in the industry. However, IIMI’s membership is diverse and there is a significant minority which believes the new rules will hamper competition, favouring the resource-rich, larger firms at the expense of smaller, independent, entrepreneurial firms. Additionally, there are reservations regarding uncertainties around Article 8 designation, and we do believe that these need to be clarified. 

“IIMI fully supports the principles behind an ESG taxonomy as we believe that it will be vital in eliminating the risk of greenwashing, which is an issue of concern in the industry. We also can’t stress enough how important it is that ESG standards across major markets do not diverge excessively, so as to avoid unnecessary confusion. 

“It also doesn’t surprise us that a number of members are calling for a cap on the amount which data providers can charge for ESG research and analytics so that they are not at a disadvantage to larger firms, as we have often seen boutiques be disproportionately impacted by the costs of complying with new regulations. Our members consistently rise to meet the challenges that the industry and investment markets throw at them, and there is no doubt that they will adapt and thrive as ESG becomes integral to the service that clients demand.

“ESG is very much the issue of the day and so it seems fitting for us to focus on this in our first paper under our new name, the Independent Investment Management Initiative, or IIMI for short. We have been going strong for over 10 years but felt it was time to choose a name that better encapsulates who we represent and what we stand for. Giving a voice to independent investment management firms over the future of financial regulation has always been at the heart of what we do, and we shall continue to promote the key role that our members, and all boutiques, play in preserving the stability and long-term focus of the financial sector at large.”

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