The New ESG Framework: Integration Of Sustainability Risks

Introduction

In its Action Plan: Financing Sustainable Growth which it published in 2018, the European Commission noted that one of its key aims was to manage "financial risks stemming from climate change, resource depletion, environmental degradation and social risks"¹ . In this, the third in our series of client briefings on the implications of the ESG framework for fund management companies² and funds, we consider the new obligations imposed on management companies under the SDFR which will require them to disclose to investors how they consider not only financial risks associated with an investment but also their policy on how they integrate sustainability risks into their investment decision-making process. We also outline proposed changes to the UCITS and AIFMD framework which were published in June 2020 under which management companies may be explicitly required to integrate sustainability risks into their investment decision processes, organisational