ESG 5.6 Sustainability entity report

In addition to the requirements at ESG 5.4.5R, a manager must, in relation to the overall assets it manages within its sustainability in-scope business:

1. (1)

   set out the following information relating to:

   1. (a)

      the manager’s approach to governance, with respect to managing sustainability risks and opportunities;

   2. (b)

      the actual and potential impacts of any material sustainability-related risks and opportunities on the manager’s businesses, strategy and financial planning;

   3. (c)

      how the manager identifies, assesses and manages sustainability-related risks; and

   4. (d)

      the metrics and targets used by the manager to assess and manage relevant material sustainability-related risks;

2. (2)

   explain, either in its sustainability entity report or in a cross-referenced public product-level sustainability report, where its approach to a particular investment strategy, asset class or product is materially different to its overall entity-level approach to governance, strategy, risk management or targets and metrics; and

3. (3)

   where relevant, briefly explain in its sustainability entity report how the manager’s strategy has influenced the decision-making and process by which it delegates functions, selects delegates, and relies on services, strategies or products offered or employed by third parties, including delegates.

Where a manager uses either a sustainability label or one or more of the terms in ESG 4.3.2R(2) in accordance with ESG 4.3.2R(1) in relation to a sustainability product, it must, to the extent relevant to the particular product, include the following information in a clear and accessible way in a sustainability entity report:

1. (1)

   a description of the resources, governance and organisational arrangements the manager has in place, commensurate with the achievement of the product’s sustainability objective and/or the manager’s investment policy and strategy for the product; and

2. (2)

   a description of the processes in place to ensure that there is a high standard of diligence in the selection of any data or other information used (including when third-party ESG data or ratings providers are used) to inform investment decisions for the sustainability product.

1. (1)

   If a manager is a member of a group, it may rely on disclosures consistent with those of the group or a member of its group when producing its sustainability entity report, but only to the extent that those group disclosures are relevant to the manager and cover the assets the manager manages as part of its sustainability in-scope business.

2. (2)

   If a manager relies on such group disclosures, it must ensure that its sustainability entity report:

   1. (a)

      includes cross-references, including hyperlinks, to any disclosures contained within the group or group member’s report that relate to assets managed by the manager in relation to its sustainability in-scope business on which the manager is relying to meet its disclosure obligations under this section; and

   2. (b)

      sets out the rationale for relying on the disclosure made by its group or a member of its group and why the disclosure is relevant to the assets managed by the manager in relation to its sustainability in-scope business.

A manager must also ensure that any material deviations between its approach to governance, strategy, risk management or targets and metrics disclosed under ESG 5.6.1R(1) and the disclosures contained within the group report are clearly explained, either in its sustainability entity report or in the report made by its group or a member of its group.

1. (1)

   If a manager or a member of its group produces a document, other than its annual financial report, which includes disclosures relating to sustainability characteristics, the manager may cross-refer to these disclosures in its sustainability entity report where this information is relevant to clients or a person who is an investor in an unauthorised UK AIF managed by a full-scope UK AIFM or a small authorised UK AIFM, including hyperlinks to where the relevant disclosures are available.

2. (2)

   Where a manager cross-refers to disclosures made by a member of its group in accordance with ESG 5.6.7R(1), it must explain in its sustainability entity report the rationale for relying on the disclosures in the supplementary document and how such disclosures are relevant to the clients or a person who is an investor in an unauthorised AIF which is a UK AIF managed by a full-scope UK AIFM or a small authorised UK AIFM of the manager’s sustainability in-scope business.

ESG 2.2.7R applies in relation to the preparation of a compliance statement for the purposes of a sustainability entity report as if the reference to a manager’s TCFD entity report has been substituted by the reference to a manager’s sustainability entity report.