Get ready for UK ESG Disclosures

Disclosure use cases

SDR regulation overview
Best practice data sets for ESG disclosure use cases

UK TCFD Reporting

Best practices and lessons learned from the EU

To help UK firms prepare for the recently announced SDR and current TCFD annual/monthly requirements, we share recommendations gathered from working with firms across the EU and UK to streamline their ESG disclosure and reporting processes.
Discover the articles in this series:
Disclosure use cases

Best practice data sets

ESG data points and models

Managing changing vendor data and complex modelling requirements

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Incorporating climate/ESG disclosures into your investment operations

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In previous articles in this series, we shared lessons learned from working with firms in the EU to incorporate climate/ESG disclosures into their investment operations. We also looked at how firms can manage evolving vendor data, plus how to navigate complex modelling requirements, with a deep dive into TCFD reporting and an additional climate value at risk (VaR) example.

In this article we give an overview of the new UK SDR regulations and the timeline firms need to adhere to. We also recommend the best practice data sets for each regulatory disclosure use case and deep dive into a TCFD case study, leveraging our Confluence Revolution ESG solution.

In the news Final UK SDR regulations

After a long wait, the FCA published the final sustainability disclosure and labelling regime for UK (SDR) on 28 November, 2023. View the full details here. The FCA has confirmed a substantial package of measures to improve the trust and transparency of sustainable investment products and minimise greenwashing. The first SDR compliance date is 31 May, 2024.

Timeline for firms’ staggered obligations
SDR investment labels
SDR requirements summary
Now timelines and final requirements have been confirmed, Confluence’s regulatory and technology experts are addressing these in detail to ensure full coverage and compliance from data vendors and risk models to meet the disclosure report formats. Further details of Confluence’s support for the final SDR requirements will be announced in the future.

Best practice Multi-vendor data approach

Mapping and maintaining the required disclosure metrics is a complex, time-consuming process. Firms can be challenged with knowing which ESG data vendors to select for the ever-evolving regulations and jurisdictional variations. ESG data vendors can vary in both quality and coverage and are continuously adjusting their data and data sets. A lack of harmonisation in ESG reporting standards and a lack of a centralised platform for ESG data collection and reporting further complicates matters for firms.

During SFDR regulations rollout we noticed most firms use multiple, sometimes overlapping data vendors and many systematically override vendor data with their own assessments, as they don’t trust or agree with the data provided by the vendors.

We recommend working with a specialised ESG reporting technology and risk modelling vendor to remove the manual processes of finding the latest data sets to comply with regulation updates, and to simplify data modelling into a ready-to-use, compliant report. The templated report needs to cover the totality of the portfolio across multiple asset classes, from equities to fixed income, and from mutual funds to derivatives if needed.

Our end-to-end ESG monitoring and reporting tool, Confluence Revolution ESG solution, simplifies the identification, management and integration of climate and sustainability risks into a firm’s overall risk management and ESG disclosure processes.

Use case data sets
Confluence adopts a client-led, multi-vendor ESG data approach to deliver climate and ESG modelling and disclosures. Through our Confluence Revolution ESG solution, we integrate and map data streams to deliver specific ESG data for our clients’ individual needs, sourced from industry leading vendors ECPI, S&P Trucost and Morningstar Sustainalytics. Other vendor data sets can also be integrated, depending upon client needs.

We recommend the following ESG data sets for ESG risk management and reporting, TCFS/CAD compliance, EET/PAI/SFDR/SDR compliance use cases:

Use case Disclosure frequency ESG risk monitoring calculation frequency Recommended ESG data set
ESG risk management and monitoring Includes ESG assessment and peer group analysis Annual or according to internal compliance needs Any frequency from daily ECPI + S&P Trucost
TCFD/CAD compliant Confluence format Monthly, quarterly, annual Through Confluence Revolution ESG solution TCFD Rev-I report On demand report as of date ECPI + S&P Trucost
EET/PAI/SFDR/SDR compliant Standardised regulatory format Monthly, quarterly, annual Through Confluence Revolution ESG solution PAI/SFDR/SDR Rev-I reports or bulk exports On demand report as of date ECPI + S&P Trucost
Data standardisation across providers
A lack of harmonisation and centralisation of ESG data standards is a challenge for firms. Standardisation across markets, insufficient coverage and inconsistency of data and methods across providers poses significant complications for firms to manage.

Using dedicated data managers Confluence simplifies and streamlines data from each vendor we work with to ensure standardisation across markets and full coverage to help firms meet their ongoing regulatory needs through:

  • Standardised integration
  • Mapping, cleansing and transformation across asset classes
  • Modelling new sets of analytics to meet the ever-evolving regulatory requirements and ongoing data updates provided by vendors
  • Data extractions and reporting tools to define and generate reports and disclosure templates for internal and external audiences.

Use case example Using S&P Trucost for TCFD disclosures

To support TCFD disclosures Confluence uses a combination of our own ECPI indices and metrics/modelling derived from data provided by S&P Trucost.

Confluence partners with S&P Trucost to map and maintain data to support all core metrics categories defined within the TCFD framework. Core TCFD metrics and categories are in-built for ESG risk assessment and reporting templates into the Confluence Revolution ESG solution. Using this end-to-end ESG monitoring and reporting tool, firms can access carbon performance, exposure to fossil fuels, power generation across renewable and non-renewable sources, green taxonomy disclosures, net-zero alignment according to various temperature pathways, scenario analysis based on physical risks monitoring across different severities, among other variables.

The screenshots below demonstrate the key categories:

Carbon performance, including Scope 1-3 Greenhouse Gas (GHG) emissions, carbon footprint and carbon intensity
Exposure to fossil fuels and breakdown of power generation across renewable and non-renewable sources
Green taxonomy disclosures
Net-zero alignment, according to various temperature pathways
Scenario analysis based on physical risks monitoring across different severities

Getting ready for SDR and TCFD

As UK firms get ready for the newly announced UK SDR and current TCFD regulations, forward, forward planning and embedding an ongoing regulatory change program into investment operations is essential.

Working with a specialised ESG reporting technology and risk modelling vendor like Confluence, firms can simplify their ESG disclosure processes, leveraging integrated multi-vendor data sets and in-built complex modelling to meet their ever-evolving regulatory requirements.

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