Contrary to what you might think, the ‘D’ in D-Day stands for neither ‘departure’, ‘decision’ or ‘doomsday.’ According to the U.S. military, the ‘D’ doesn’t stand for anything – it’s merely an alliterative placeholder used to designate a particular day on the calendar. D-Day, in Army vernacular, simply indicates the start date for specific field operations.
Arguably, the ‘D’ in SFDR, the EU’s Sustainable Finance Disclosure Regulation that came into force this week, is much more meaningful. The ‘D’ as in ‘disclosure’ carries the promise of transparency and authenticity for clients and more sustainable investment choices for investors. Ask asset managers, however, and they might admit that the alternative meaning of this particular ‘D’ among their ranks has been ‘dread’.
Not that anyone was expecting March 10 to be as bloody and dramatic as that most well-known of D-Days, June 6, 1944. As with other field operations, however, it is yet unclear how it will play out and how many victims it will leave in its wake.
Mobilizing the troops has been relatively straightforward. Early on, since the European Commission first released its action plan for financing sustainable growth back in 2018, it became clear that the SFDR would eventually affect all EU financial market participants and financial advisers. Mind you, this did not prevent attempts to dodge the draft, especially among those at the edges of the regulation’s scope. Yet there have been brave volunteers, too, joining the ranks even before they have been called upon.
As we drew closer to the faithful day, rumours started circulating about confusion among the troops. The requirement for asset managers to differentiate between ‘article 9’ financial products, claiming to contribute to a sustainable objective and ‘article 8’ products, supposed to promote environmental or social characteristics, has been somewhat challenging. The word ‘to promote’ in particular begs for further clarification. Meanwhile, the news of delayed essential reinforcements, like the Level 2 regulation, was also demoralizing.
The day itself, however, came to pass rather underwhelmingly calm, at least here, in the Nordics. No loud trumpets heralded a new green era of transparency, just the barely discernible buzz of everyone simultaneously updating the information on their websites, efficiently and methodically while, possibly, looking sideways at what everybody else is doing. That’s modern warfare for you, not very exciting.
So, having stormed the beaches of Normandy after an exhausting voyage and staring into the future, what does it look like? All we know is that it is going to take time. The current SFDR will be rolled out over at least the next two years, with different texts coming into force up to January 2023. The technical screening criteria are not yet final, but drafts have been published for two of the six environmental objectives. These should undoubtedly keep all troops busy in the years to come.
We have a long journey ahead of us. God speed!
For more on the first steps of Nordic managers, catch up with Handelsbanken, Nordea and Storebrand SPP.
© Picture by sergign