Looking for more information about our SDR service or impact verification and assurance in general? Then take a look at some frequently asked questions.
Verification FAQs
As more and more organisations seek to align with industry frameworks and standards, having this alignment independently verified can demonstrate credibility and showcase your commitment to positive impact creation. As a learning exercise, verification can also help ensure impact systems and practices are on the right track to deliver meaningful results. This holds particular significance due to the ongoing evolution of ‘best practices’ in this arena. Utilising verification as a learning tool, investors can evaluate their alignment with both established and emerging benchmarks, ensuring their trajectory is well-aligned to yield substantial and meaningful results.
Obtaining third-party validation holds significant potential for showcasing the legitimacy of an impact strategy. This is especially pertinent given the current concerns surrounding impact-washing and the escalating demand for more rigorous assessment of impact assertions. This demand is further underscored by regulatory frameworks like the UK’s Sustainability Disclosure Requirements (SDR) and the EU’s Sustainable Finance Disclosure Regulation (SFDR).
Impact verification can serve as a pivotal factor in cultivating confidence and authenticity within the realm of impact investing, setting it apart as a distinct methodology within the broader landscape of impact investing.
Sometimes, a fresh perspective is all it takes to transform good intentions into great achievements. Our service offers an external opinion from seasoned impact professionals who understand the nuances of effective change-making. Benefit from their insights to fine-tune your approach and ensure your current impact strategy is truly fit-for-purpose.
The results of Impact Verification can be used to inform decision-making, improve programme design and implementation, secure funding or investment, communicate achievements to stakeholders, and guide future planning for greater effectiveness and sustainability.
SDR FAQs
Some of the key aspects of the SDR regime that fund managers need to consider include:
Sustainability objective
This is the specific, measurable goal that an investment product aims to achieve in terms of sustainability. The objective should be clear and concise, and it should be aligned with the fund’s overall investment strategy.
Key Performance Indicators (KPIs)
KPIs are used to measure the progress of a fund towards achieving its sustainability objective. They should be quantifiable and relevant to the fund’s sustainability goals.
Investor contribution
This is the extent to which the fund’s investments are contributing to the achievement of its sustainability objective. It is important for fund managers to be able to demonstrate how their investments are making a positive impact.
Robust, evidence-based standard
This is a standard that is used to assess the sustainability of assets. The standard should be credible and transparent, and it should be based on the latest scientific evidence.
Investment policy and strategy
The fund’s investment policy and strategy must be aligned with its sustainability objective. This means that the fund’s investments should be consistent with its stated sustainability goals.
Stewardship
Stewardship activities are used to promote the sustainability of investee companies. This can include engaging with companies on environmental, social, and governance (ESG) issues.
Disclosure requirements
Fund managers must disclose certain information about their funds’ sustainability profile to investors. This includes information about the fund’s sustainability objective, KPIs, and investor contribution.
You can find more information about the SDR on the FCA website and in the SDR technical guide.
Additional resources
The UK’s Financial Conduct Authority’s (FCA) Sustainability Disclosure Requirements (SDR) require fund managers to categorise their funds into one of four categories:
- Sustainability Focus
- Sustainability Improvers
- Sustainability Impact
- Sustainability Mixed Goals
Understanding the FCA’s SDR labels
The SDR labels are designed to help investors understand the sustainability profile of investment products. The labels are based on a number of factors, including the fund’s investment objective, strategy, and stewardship activities.
Sustainability Focus
A Sustainability Focus fund invests in assets that are already environmentally and/or socially sustainable.
Sustainability Improvers
A Sustainability Improvers fund invests in assets that have the potential to improve environmental and/or social sustainability over time.
Sustainability Impact
A Sustainability Impact fund aims to achieve a pre-defined, positive, measurable impact in relation to an environmental and/or social outcome.
Sustainability Mixed Goals
A Sustainability Mixed Goals fund invests in accordance with two or more of the sustainability objectives listed above.
Choosing the right label
Fund managers need to carefully consider the SDR requirements before selecting a label for their fund. The FCA has provided detailed guidance on each label, including the criteria that funds must meet in order to qualify.
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