Under SDR, measuring and reporting on the impact of the assets held in the fund is not enough.
We must in addition demonstrate that our own contribution as asset managers is also positive and aligned with the fund’s sustainability objective.
The SDR process has helped us be much clearer and more structured in our approach to showing how engagement supports the sustainability objective.
As a specialist fund manager we could act quickly on decisions to change the wording in the prospectus in response to feedback from the FCA.
As specialist impact investors, we were able to push back on points lawyers and others raised that might otherwise have slowed the process.
Conclusion
The SDR-labelling regime is a necessary and welcome step towards cementing trust with investors, and a notable milestone for sustainable finance.
The fact the process is so tough might be a sign that it is working.
It is in everyone’s interests that we have a regime that has a high enough standard that people trust it.
The truth is that this was always going to be a tough process.
We are thrilled to have the label, but it will be a pyrrhic victory if the market as a whole does not embrace the new regime.
It is for this reason that we are actively sharing our experiences with peers to support their ambitions to utilise the labels.
We believe that once it is clearer to asset management firms what the FCA is looking for in applying the principles of SDR rather than the regulator stipulating rules, then the pain will ease.
Seb Beloe is partner and head of research at WHEB Asset Management
