Clarity AI rolls out SFDR-compliant tool for index and ETF providers

Clarity AI

Clarity AI, a leading sustainability technology platform, has announced the introduction of its innovative methodology.

With the European Union’s emphasis on sustainable finance and its Sustainable Finance Disclosure Regulation (SFDR) gaining prominence, there is an evident need for tools that align with these regulations. Clarity AI’s new methodology is poised to meet this demand by facilitating index and ETF providers in the creation and marketing of products that are SFDR-compliant.

Renowned for its adept use of machine learning and big data, Clarity AI provides invaluable environmental and social insights to a wide audience, ranging from investors and organisations to consumers and governments. As of September 2023, their impressive platform boasts analysis capabilities for 70,000 companies, 430,000 funds, 201 countries, and 199 local governments.

The Sustainable Index and EFT methodology are designed to enable index and ETF providers to construct, define, and/or market products that are in line with the European Union’s Sustainable Investment definition, as per Article 2(17) of the SFDR. This novel approach allows financial market participants to decipher how companies qualify under the sustainable investment assessment.

This includes setting benchmarks on the UN Sustainable Development Goals (SDGs), EU Taxonomy contribution, and the SFDR Principle Adverse Impact indicators (PAIs), all tailored within the boundaries set by the regulation.

According to Clarity AI’s insights, this methodology stands as a valuable tool for financial market participants, helping them determine adherence levels of companies to sustainable investment criteria. The entire process incorporates varied criteria, ensuring that investments are not just compliant but are genuinely fostering sustainable growth.

The EU’s SFDR is a significant component of the EU’s Action Plan focused on financing sustainable growth. This regulation seeks to create a harmonised set of rules for the financial market’s participants. The primary aim is to enhance transparency in terms of integrating sustainability risks and addressing the negative impacts of sustainability, while also streamlining the dissemination of sustainability-related financial product information.

Clarity AI Senior Product Manager Ani Widham said, “We know that investors seek clarity and transparency when evaluating their portfolios, so providing them with this efficient methodology, aligned with the SFDR regulation, will enable them to make better sustainable investment decisions to benefit their companies and the wider sustainable investment industry.”

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