UK manager seeks taxonomy compliance through data outsourcing

On the 02/01/21 at 12:56PM


Adrien Paredes-Vanheule

Aberdeen Standard Investments (ASI) will use FTSE Russell’s Green Revenue 2.0 Data Model for its climate funds range.

A research released by consultant EY last January suggested that mutual fund directors see compliance as their largest concern regarding environmental, social and governance criteria, especially with the round of green regulations coming in Europe. EY thus emphasised on the importance of fund boards getting routine updates on regulatory trends and seeking assurance from chief compliance officer that the fund’s practices are keeping pace.

To keep pace with the requirements of the upcoming European green taxonomy, British asset management firm Aberdeen Standard Investments (ASI) has selected FTSE Russell’s Green Revenue 2.0 Data Model, unveiled by the index and data analytics provider in September 2020. ASI will use the data for its climate funds range to comply with the EU taxonomy, in particular its multi-asset climate solutions fund (MACS). The fund’s focus is on equities, fixed income, real estate and listed renewable energy infrastructure trusts where more than 50% of company revenue derives from ‘green’ economic activities as defined by FTSE Russell’s taxonomy of green revenues.

The index provider’s data model covers 10 sectors, namely energy generation; energy equipment; energy markets and efficiency; environmental resources; environmental support services; food and agriculture; transport equipment; transport solutions; waste and pollution control; and water infrastructure and technology. These are split into 64 sub-sectors and 133 micro-sectors, encompassing 16,000 listed companies across 48 markets (or 98.5% of the total global market value of listed companies).

Arne Staal, global head of research and product management, FTSE Russell, said, “ASI has been early to recognise that green revenues data used to quantify a fund’s alignment to the green economy will be essential in complying with the incoming EU Taxonomy disclosure requirements for sustainable investment products by the end of 2021.” 

Staal acknowledged that with ESG fund inflows’ continuous growth and with standards and market definitions proliferating, investors will need to understand how to comply with these rules set to introduce welcome standardisation and transparency to the market.  “High quality, comparable and relevant underlying sustainable investing data, available at scale will be a critical part of the compliance toolkit,” Staal said.

As outlined by EY in its study, many firms have consolidated multiple data sources and even built their own scoring methodologies and algorithms. The consultant said having multiple providers can also result in higher costs and increased need for coordination, while home-grown scores present new risks.