Susanne Schartz (Seqvoia): The data challenges behind the SFDR

Seqvoia chief operating officer Susanne Schartz identifies the challenges of compliance with the SFDR requirements: identifying and locating data is important, but understanding it is central – which for each company means defining its data universe.

 

What kind of data do you need to inform investors about ESG strategies?

 

The challenge in sharing information with investors is twofold – the data required per se, and providing an understanding of it. Understanding is central to acquiring knowledge from the data. The EU’s Sustainable Finance Disclosure Regulation initially focuses on general statements that are not backed up by data, with disclosures in companies’ prospectuses the first step. The next level of disclosures goes deeper into the product – is a product sustainable, and to what degree? If not, can you be sure that it does no harm? Finally, from January 2022, the legislation will require a new investor-oriented disclosure document that is designed to provide insight into ESG characteristics at portfolio management level, including market comparisons.In the case of ESG, understanding the data originates from defining its universe. This means identifying data points, but just as important is to understand the relationship of this data to each other and to your products. This will provide a framework of what you are seeking to deliver – if you like, a guiding light through the data jungle.

How does this impact each company’s data universe?

 

There are no miracles – a lot of work lies ahead, but as with any challenge, investment of time and effort will pay off. The first step is defining the data that is available – your products, any ESG-related data that you already possess, and any other data that is helpful in creating the disclosures. This requires identifying essential data points and their location, as well as essential data that is missing, and non-essential data, which can contribute to quick wins where possible. The key is defining the content from which customers will benefit and identifying its location within the data universe.

"ESG is not a siloed activity but intimately bound in with investment, compliance,

marketing and operations."

What risks and opportunities do you identify?

 

The opportunity lies in investor interest – demand for investments that are in line with their personal choices and values, which is especially apparent with institutional investors. The transparency of financial products and their ability to help achieve sustainability goals will represent a significant advantage over competitors. Investors want these goals to be taken seriously, and in return are ready to engage as a partner. But companies ill-equipped to do this risk falling short. It’s not enough to create an Excel spreadsheet – company data models must be recorded in a more sophisticated manner that captures data points as well as their relationships and make both transparent within the organisation. A systematic data layer enables existing data such as product information to be linked to the ESG data model and existing disclosures can be added, both to save time and ensure alignment across all customer communications. As you add the new sustainability data, your data universe will grow, as will organisational understanding of where the sustainability journey is going and the opportunities it will provide. ESG is not a siloed activity but intimately bound in with investment, compliance, marketing and operations.Technology is essential to make use of cross-departmental knowledge and to enable the joint creation of solutions that are coherent and transparent to all teams.