MainStreet Partners launches fund sustainability due diligence solution

MainStreet Partners, the London-based independent ESG Advisory and Portfolio Analytics firm, has today (14 June) launched an SDR market solution to support the "under-served and overlooked fund buyer segment of the market".

The new product and service combination provides an easy solution tailored specifically to the challenges faced by fund buyers, it said.

This is the much-needed answer to the challenge of how fund buyers define an absolute measure of sustainability for the assets they invest in and how to evidence sustainability performance of those funds, outlined by SDR.

Moreover, asset managers, DFMs and MPS providers can utilise this product and service to demonstrate an independent assessment – delivered by an appropriately skilled team - of their robust, evidence-based sustainability measure, outlined by SDR.

MainStreet Partners’ Fund Sustainability Due Diligence Report consists of a detailed qualitative and quantitative output, which is the result of its detailed Sustainability Due Diligence Assessment Process.

This includes fund manager interviews and deep analysis of all fund documentation and portfolio holdings to derive a 1-5 ESG Rating. Funds with a 4 or above rating are eligible to receive a formal letter of Certification, outlining that the fund has met the SDR standards set out by the FCA, which can be shared publicly to investors or more widely by the client.

MainStreet Partners warned earlier this month that fund buyers - discretionary fund managers (DFMs), Model Portfolio Service (MPS) providers and wealth managers – were in need of support to meet the new SDR labelling regime that comes into effect on 31 July 2024.

It cautioned fund buyers against “an ostrich-like denial” about the SDR transition during the window of implementation for SDR-compliant naming and marketing rules (ending 2 December 2024, when funds are liable to FCA enforcement action).

Jacob Kasaka, research associate at MainStreet Partners, said: “A particular challenge for fund buyers is how to define an absolute measure of sustainability for each fund and then measure and monitor the assets sustainability performance. Some wealth managers are looking to rely on the underlying fund labels with a ‘sum of the parts’ approach, while some wish to perform ‘look-through’ on portfolios to analyse each underlying security.

“Both of these approaches are misaligned with the spirit of the regime, they can be cumbersome to perform and can feel overwhelming for fund buyers to process, let alone to commit to operationalising. In addition, a requirement of the FCA SDR is that fund buyers and asset managers provide an independent assessment of the absolute measure of sustainability.

“Taken together, this is a huge compliance headache that we aim to solve with our dual offering of an independent, experienced and qualified assessment alongside the new Fund Sustainability Due Diligence Report for asset managers and fund buyers.”