Alternative Asset Management & Sustainability Insights: Recent Episodes
Travers Smith
In this week's issue of Travers Smith's Alternative Insights, we are looking at public private markets and how asset managers can influence them.
Links:
https://www.msn.com/en-gb/money/video/80-of-draghi-investment-ask-will-come-from-private-capital-says-kkr/vi-AA1NlSif
https://www.cityam.com/rishi-sunak-assures-city-that-bonfire-of-financial-services-regulations-post-brexit-is-around-the-corner/
https://www.british-business-bank.co.uk/news-and-events/news/british-business-bank-response-autumn-budget-2024
https://www.british-business-bank.co.uk/finance-options/british-growth-partnership
https://www.bvca.co.uk/policy/nova.html
https://www.lse.ac.uk/events/open
https://www.fmg.ac.uk/isf/blended-finance-lab
https://www.bankofengland.co.uk/-/media/boe/files/speech/2015/building-real-markets-for-the-good-of-the-people.pdf
In this week's issue of Travers Smith's Alternative Insights, we are looking at transition plans in the UK.
In this week's issue of Travers Smith's Alternative Insights, we are looking at transatlantic tax policy and the art of the deal.
Links:
https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-alternative-insights-the-impact-of-uk-tax-policy/
https://www.traverssmith.com/knowledge/knowledge-container/new-uk-carried-interest-tax-regime-draft-rules-published/
https://www.traverssmith.com/knowledge/knowledge-container/new-uk-carried-interest-tax-regime-draft-rules-published/
In June, the UK took the next step in its plan to adopt international sustainability reporting standards for UK businesses, publishing a key consultation document. On the same day, it launched a consultation on how to implement its manifesto commitment to mandate credible, Paris-aligned climate transition plans for FTSE 100 companies and UK-regulated financial services firms, including asset managers.
In this week's issue of Travers Smith's Alternative Insights, we are looking at the impact of Taxing financial services professionals in the UK.
Links:
https://assets.publishing.service.gov.uk/media/6735f4670b168c11ea82311d/Financial_Services_Growth___Competitveness_Strategy_-_Call_for_Evidence_.pdf
https://www.reuters.com/world/uk/uk-scrap-non-dom-tax-status-foreign-earnings-2024-03-06/
https://www.traverssmith.com/knowledge/knowledge-container/autumn-budget-2024-non-dom-regime/#thechanges2
https://on.ft.com/3Ij9PrT
https://www.traverssmith.com/knowledge/knowledge-container/rule-changes-for-european-private-fund-managers/
https://obr.uk/docs/dlm_uploads/OBR_Economic_and_fiscal_outlook_Oct_2024.pdf
https://www.traverssmith.com/knowledge/knowledge-container/government-provides-welcome-update-to-carried-interest-reform-proposals/
https://www.ft.com/content/ba781c26-f3f0-4657-bad7-d47337353790
https://on.ft.com/4nIgID5
In this week's issue of Travers Smith's Sustainability Insights we are looking at the UK's adoption of ISSB standards.
In this week's issue of Travers Smith's Alternative Insights, we are looking at liquidity routes for portfolio companies before exit.
Links:
https://www.linkedin.com/posts/travers-smith_assetmanagement-privatecapital-markets-ugcPost-7341038259122126849-K5r1?utm_medium=ios_app&rcm=ACoAAANSBP8B6s50YH7QZ6bxZ_O1alhPfCdpZEM&utm_source=social_share_send&utm_campaign=copy_link
https://www.traverssmith.com/knowledge/knowledge-container/pisces-key-questions-answered
https://www.gov.uk/government/news/government-goes-further-and-faster-to-boost-capital-markets-by-delivering-pisces
https://on.ft.com/3FyWeM2
In the fourth Sustainability Exchange of the series, Simon invites Paula Langton, Partner and head of the sustainability practice at Campbell Lutyens and Phil Bartram to unravel the complexities of SFDR classification.
Listen now to explore:
- How Article 8, 9, and 6 classifications truly differ, and why it matters in today’s fundraising climate
- Shifts in LP preferences, regulatory requirements, "sustainability tourists" and the evolution towards long-term value creation
- Navigating related obstacles and choosing the appropriate sustainability commitments for your investor base
In this week's issue of Travers Smith's Sustainability Insights we are looking at the ongoing review of the SFDR.
Links:
https://finance.ec.europa.eu/sustainable-finance/disclosures/sustainability-related-disclosure-financial-services-sector_en#:~:text=attracting%20private%20funding%20to%20help%20Europe%20make%20the%20shift%20to%20a%20net%2Dzero%20economy.
https://www.traverssmith.com/knowledge/knowledge-container/possible-changes-to-the-eu-sfdr-the-european-commission-seeks-views/
https://finance.ec.europa.eu/document/download/0f2cfde1-12b0-4860-b548-0393ac5b592b_en?filename=2023-sfdr-implementation-summary-of-responses_en.pdf
https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/14666-Revision-of-EU-rules-on-sustainable-finance-disclosure_en
https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/14666-Revision-of-EU-rules-on-sustainable-finance-disclosure/F3562074_en
https://uksif.org/uksif-response-eu-commission-sfdr-call-for-evidence/
https://finance.ec.europa.eu/publications/categorisation-products-under-sfdr-proposal-platform-sustainable-finance_en
https://www.traverssmith.com/knowledge/knowledge-container/simplification-or-deregulation-the-eus-sustainability-omnibus-explained/
In this week's issue of Travers Smith's Alternative Insights, we are looking at the rule changes for European private fund managers.
Links:
The Regulation of Hedge Funds and Private Equity: A Case Study in the Development of the EU’s Regulatory Response to the Financial Crisis by Eilis Ferran :: SSRN
Financial services – review of EU rules on alternative investment fund managers
Report on the operation of the alternative investment fund managers directive (AIFMD) – Directive 2011/61/EU
Kickstart economic growth – The Labour Party
e6cd4328-673c-4e7a-8683-f63ffb2cf648_en
Regulations for Alternative Investment Fund Managers (Accessible) - GOV.UK
Call for Input: Future regulation of alternative fund managers
Targeted consultation on integration of EU capital markets 2025 - European Commission
Commission unveils savings and investments union strategy to enhance financial opportunities for EU citizens and businesses - European Commission
The Draghi report on EU competitiveness
In this week's issue of Travers Smith's Sustainability Insights we are looking at the forthcoming round of sustainability reports for alternative asset managers.
Links:
https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/14666-Revision-of-EU-rules-on-sustainable-finance-disclosure_en
https://www.gov.uk/government/publications/climate-related-financial-disclosures-for-companies-and-limited-liability-partnerships-llps
https://www.traverssmith.com/knowledge/knowledge-container/sustainability-disclosure-requirements-sdr-and-investment-labels-the-new-rules/#A2:~:text=section%203%20below.-,Entity%2Dlevel%20disclosures,-Requirements%20on%20UK
https://assets.bbhub.io/company/sites/60/2021/10/FINAL-2017-TCFD-Report.pdf
https://www.traverssmith.com/knowledge/knowledge-container/the-clock-stops-but-the-bus-rumbles-on-csrd-omnibus-clears-its-first-hurdle/
https://www.ifrs.org/issued-standards/ifrs-sustainability-standards-navigator/
In this episode Simon, Trysha Daskam-Smith, Head of ESG Strategy at Silver Regulatory Associates and Michael Raymond delve into pressing issues faced by European fund managers when dealing with US investors amidst the current headlines.
Tune in to explore:
- A nuanced discussion of how the term ESG is perceived across different markets, especially US investors with varied stances in different states
- Practical advice on communicating ESG commitments consistently and factually, avoiding political pitfalls while emphasising value creation
- How international regulatory standards influence global fund marketing strategies
In this week's issue of Travers Smith's Alternative Insights, we are looking at the UK regulator's review of valuations in private markets, highlighting some important action points for UK-regulated firms.
Links:
FR10/23 Thematic Analysis: Emerging Risks in Private Finance
Private market valuation practices | FCA
23-013_6a38dcc8-4aff-4acc-8f28-d024728613d6.pdf
How Fair are the Valuations of Private Equity Funds? by Tim Jenkinson, Miguel Sousa, Rüdiger Stucke :: SSRN
Portfolio letter: Asset Management & Alternatives - Supervisory Strategy
In this week's issue of Travers Smith's Sustainability Insights we are looking at investments in defence by alternative asset managers.
Links:
Rethinking Defense: The Role of Private Capital | Bain & Company
Preqin
Woke guns? Banks want weapons badged as a social good – POLITICO
Our position on sustainability regulations and UK defence | FCA
ESMA Guidelines on Fund Names | Travers Smith
EU foreign subsidies regulation: another notification regime for dealmakers to become law | Travers Smith
Asset managers race to set up European defence funds
Dutch pensions to invest €100bn in risky assets boosting Europe’s defence efforts
23-315 EIF Policy on Exclusions and Restrictions.pdf
Norway urged to drop ‘crazy’ ban on investment in defence companies
guidingprinciplesbusinesshr_en.pdf
BHR-Arms-sector-info-note.pdf
From Berlin to Tokyo, the fears of a new nuclear arms race
A series of dynamic conversations hosted by Simon Witney, sustainable finance specialist, joined by two expert guests.
Simon's guests, Ross Butler, Managing Director of Linear B Group, and Tosin Adeyeri, Partner in our Funds team, debate opposing answers to this topical question. Listen now to learn what ESG-linked carried interest means and how it works, plus the pros and cons of incorporating non-financial KPIs into fund economics from their frontline perspective.
The episode ends with a one-sentence answer from each expert guest to… Should your next fund include and ESG or perhaps impacts linked carried interest?
In this week's issue of Travers Smith's Alternative Insights, we are looking at securitisation reform in Europe.
Links:
UK regulators to face twice-yearly reviews as Reeves vows to slash red tape | Rachel Reeves | The Guardian
New approach to ensure regulators and regulation support growth (HTML) - GOV.UK
New approach to ensure regulators and regulation support growth (HTML) - GOV.UK
Simplification or Deregulation? The EU's Sustainability Omnibus Explained | Travers Smith
How to fix Europe’s securitisation market
US and Asia securitisation markets contribute far more to financing their economies than Europe - “Now is the time to address the gap | AFME
Investors call for shake-up of Europe’s ‘failed’ securitisation market
Reviving the UK securitisation market
Apollo Sees €1 Trillion Opportunity If Europe Overhauls ABS
Securitisation Data Report Q4 2023 & 2023 Full Year | AFME
The Opportunity Of Asset-Based Finance Draws In Private Credit | S&P Global Ratings
97e481fd-2dc3-412d-be4c-f152a8232961_en
Securitisation | FCA
Targeted consultation on the functioning of the EU securitisation framework 2024 - European Commission
ACC and AIMA respond to European Commission’s consultation on securitisation
AFME responds to the European Commission’s targeted consultation on the functioning of the EU Securitisation Framework | AFME
In this week's issue of Travers Smith's Sustainability Insights we are asking whether it still makes sense for global compliance programmes to adopt a single standard.
Links:
- Anu Bradford | Columbia Law School
- Fact Sheet: President Donald J. Trump Protects Civil Rights and Merit-Based Opportunity by Ending Illegal DEI – The White House
- Federal Register :: Pausing Foreign Corrupt Practices Act Enforcement To Further American Economic and National Security
- SEC.gov | Acting Chairman Statement on Climate-Related Disclosure Rules
- Final rule: The Enhancement and Standardization of Climate-Related Disclosures for Investors
- US judge temporarily blocks Trump’s anti-DEI purge | US news | The Guardian
- COMPS-9569.pdf
- Failure to prevent fraud guidance published – what do businesses need to do now? | Travers Smith
- Simplification or Deregulation? The EU's Sustainability Omnibus Explained | Travers Smith
- Ensuring Accountability for All Agencies – The White House
- Defending American Companies and Innovators From Overseas Extortion and Unfair Fines and Penalties – The White House
- Withdrawing The United States From The World Health Organization – The White House
In this week's issue of Travers Smith's Alternative Insights, we are looking at tax incentives in private markets.
Links:
Our 2024 budget briefing - https://www.traverssmith.com/knowledge/knowledge-container/autumn-budget-2024/
BVCA The tax treatment of carried interest – Consultation on qualifying conditions - https://www.bvca.co.uk/static/2e27e13b-ef87-440e-b75bb6717c8e228a/BVCA-response-to-carried-interest-consultation-31-Jan.pdf
Our briefing: Salaried members update: HMRC to reverse controversial guidance changes on increases in capital contributions - https://www.traverssmith.com/knowledge/knowledge-container/salaried-members-update-hmrc-to-reverse-controversial-guidance-changes-on-increases-in-capital-contributions/
A series of dynamic conversations hosted by Simon Witney, sustainable finance specialist, joined by two expert guests.
Simon meets with James Alexander, Chief Executive of The UK Sustainable Investment and Finance Association (UKSIF) and Sarah-Jane Denton, Director of our Operational Risk & Environment team to evaluate the need, benefits, and practicality of a implementing UK-specific green taxonomy versus adopting the current EU framework.
The episode ends with a one-sentence answer from each expert guest to… does the UK need a green taxonomy?
The Sustainability Exchange was first published in our Talking. Sustainability. podcast. Follow for latest episodes in your favourite podcast player: https://feeds.captivate.fm/travers-smith-talking-sustainability-esg/
In this week's issue of Travers Smith's Sustainability Insights we are looking at the simplification of EU sustainability laws.
Links:
https://www.epp.eu/files/uploads/2025/01/EPP-Retreat-Growth-and-Jobs-statement.pdf
https://www.humanrights.dk/files/media/document/Letter%20of%20European%20NHRIs%20on%20the%20omnibus%20proposal.pdf
https://www.unpri.org/download?ac=22691
In this week's issue of Travers Smith's Alternative Insights, we focus on our annual preview of the year ahead for the alternative asset managers, which we call Insights '25. Please do check it out – a link is below.
Links:
Insights '25 - What to expect in 2025
Investors - Alternative Insights 2025
People and DE&I - Alternative Insights 2025
In this week's issue of Travers Smith's Sustainability Insights we are looking at UK sustainability regulation, and what's in store for 2025.
Links:
https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-sustainability-insights-eu-sustainability-regulation-in-2025/
https://www.responsible-investor.com/esg-round-up-germanys-scholz-calls-for-two-year-delay-to-csrd/
https://www.traverssmith.com/knowledge/knowledge-container/icymi-a-recap-of-developments-in-eu-sustainability-reporting-in-2024/
https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-sustainability-insights-the-role-of-government-in-transition-finance/
https://www.traverssmith.com/knowledge/knowledge-container/size-matters-guidance-on-climate-related-disclosures-for-large-companies-and-llps/
https://www.gov.uk/guidance/energy-savings-opportunity-scheme-esos
https://www.traverssmith.com/knowledge/knowledge-container/from-energy-savings-opportunity-to-energy-savings-requirements/
https://www.frc.org.uk/news-and-events/news/2024/12/uk-sustainability-tac-issues-final-recommendations/
https://www.traverssmith.com/knowledge/knowledge-container/cs3d-whats-new-and-whats-next/
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5083571
https://www.theglobalcity.uk/PositiveWebsite/media/Research-reports/Scaling-Transition-Finance-Report.pdf
https://www.traverssmith.com/knowledge/knowledge-container/uk-modern-slavery-act-2015-to-reform-or-not-to-reform-that-remains-the-question-following-latest-position-from-government/
https://www.gov.uk/government/publications/modern-slavery-government-response-to-house-of-lords-committee-report
https://committees.parliament.uk/committee/700/modern-slavery-act-2015-committee/news/203272/uks-response-to-modern-slavery-has-not-kept-up-with-the-advances-of-other-nations/
https://www.traverssmith.com/knowledge/knowledge-container/sustainability-disclosure-requirements-sdr-and-investment-labels-the-new-rules/
https://www.traverssmith.com/knowledge/knowledge-container/sdr-finalised-guidance-on-the-anti-greenwashing-rule/
https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-sustainability-insights-labels-for-uk-funds-but-limited-impact-for-private-capital/
https://www.traverssmith.com/knowledge/knowledge-container/sdr-and-investment-labels-extension-of-the-regime-to-uk-portfolio-managers/
https://www.traverssmith.com/knowledge/knowledge-container/sustainability-disclosure-requirements-sdr-and-investment-labels-the-new-rules/#:~:text=wealth%20management%20services.-,Overseas%20funds%C2%A0,-The%20FCA%20says
https://www.fca.org.uk/news/statements/fca-welcomes-move-bring-esg-ratings-providers-regulation
In this week's issue of Travers Smith's Sustainability Insights we are looking at EU sustainability regulation, and what's in store for 2025.
Links:
https://www.consilium.europa.eu/en/press/press-releases/2024/11/08/the-budapest-declaration/
https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-sustainability-insights-the-impact-of-the-draghi-report-on-esg-regulation/
https://www.businesseurope.eu/sites/buseur/files/media/position_papers/legal/2024-11-05_joint_trade_association_statement_towards_eu_due_diligence_that_works_for_all_0.pdf
https://www.consilium.europa.eu/en/press/press-releases/2024/11/08/the-budapest-declaration/#:~:text=We%20must%20adopt%20an%20enabling%20mindset%20based%20on%20trust%2C%20allowing%20business%20to%20flourish%20without%20excessive%20regulation.
https://www.peievents.com/en/event/responsible-investment-forum-europe/
https://www.linkedin.com/posts/tim-lewis-a517261a_last-night-we-gathered-members-of-our-asset-activity-7265398692105314307-376F
https://www.traverssmith.com/knowledge/knowledge-container/cs3d-whats-new-and-whats-next/
https://www.traverssmith.com/knowledge/knowledge-container/csrd-the-road-to-compliance
https://apps.fliplet.com/esgapp
https://www.traverssmith.com/knowledge/knowledge-container/possible-changes-to-the-eu-sfdr-the-european-commission-seeks-views/
https://www.traverssmith.com/knowledge/knowledge-container/esas-propose-changes-to-sfdr-regulatory-technical-standards/
https://www.traverssmith.com/knowledge/knowledge-container/esma-guidelines-on-fund-names/
https://www.consilium.europa.eu/en/press/press-releases/2024/11/19/environmental-social-and-governance-esg-ratings-council-greenlights-new-regulation/
https://www.fca.org.uk/news/statements/fca-welcomes-move-bring-esg-ratings-providers-regulation
https://www.newprivatemarkets.com/pe-firms-at-risk-of-esg-litigation-says-travers-smith/
In this week's issue of Travers Smith's Alternative Insights, we are looking at some recent UK government announcements that affect alternative asset managers.
Links:
https://www.traverssmith.com/knowledge/knowledge-container/autumn-budget-2024/
https://www.gov.uk/government/speeches/mansion-house-2024-speech
https://www.gov.uk/government/news/chancellor-fires-up-financial-services-sector-to-drive-growth#:~:text=BVCA%20Chief%20Executive%20Michael%20Moore%20said%3A%C2%A0
https://assets.publishing.service.gov.uk/media/6735d9ebb613efc3f18230e9/pension_fund_investment_and_the_uk_economy.pdf
https://www.gov.uk/government/publications/pensions-investment-review-interim-report
https://www.ft.com/content/362ca4cd-a892-4525-bddf-82abe5f339b4#msdynmkt_trackingcontext=910b9634-aa02-4b3a-a831-bcb7e4b55c60
https://assets.publishing.service.gov.uk/media/67372cf9c0b2bbee1a127202/pensions_investment_review_unlocking-the_uk_pensions_market_for_growth.pdf
https://www.gov.uk/government/calls-for-evidence/financial-services-growth-and-competitiveness-strategy
https://on.ft.com/3V9Tpp8
In this week's issue of Travers Smith's Sustainability Insights we are looking at what COP29 tells us about the new UK government's green growth ambitions.
Links:
https://unfccc.int/cop29
https://www.bbc.co.uk/news/articles/cpqd1rzw9r4o
https://www.bbc.co.uk/news/articles/cx2lknel1xpo
https://www.traverssmith.com/knowledge/knowledge-container/what-to-expect-at-cop29/
https://unfccc.int/process-and-meetings/the-paris-agreement
https://unctad.org/publication/new-collective-quantified-goal-climate-finance
https://www.bbc.co.uk/news/science-environment-54797743
https://www.ft.com/content/24b994ec-9d69-47df-8c23-efc5762877e9
https://unfccc.int/resource/docs/convkp/conveng.pdf
https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-sustainability-insights-the-role-of-government-in-transition-finance/
https://www.iigcc.org/hubfs/IIGCC%20publishes%20open%20letter%20in%20support%20of%20an%20ambitious%20New%20Collective%20Quantified%20Goal%20on%20climate%20finance.pdf
https://www.newprivatemarkets.com/tpg-and-brookfield-hail-climate-fund-momentum/
https://www.bbc.co.uk/news/articles/cx2ny8zndpxo
https://www.bbc.co.uk/news/articles/c4gve4d8jljo
In this week's issue of Travers Smith's Alternative Insights, we are looking at the Labour Government's Autumn Budget, and its likely impact on UK alternative asset managers.
In this week's episode of Travers Smith's Sustainability Insights we are looking at the new UK government's approach to transition finance.
Links:
https://www.gov.uk/government/news/record-breaking-international-investment-summit-secures-63-billion-and-nearly-38000-jobs-for-the-uk
https://www.cityam.com/bosses-at-worlds-biggest-banks-britain-is-ready-for-investment/
https://www.gov.uk/government/speeches/pm-international-investment-summit-speech-14-october-2024
https://www.gov.uk/government/news/game-changing-tech-to-reach-the-public-faster-as-dedicated-new-unit-launched-to-curb-red-tape
https://www.cityam.com/rachel-reeves-promises-to-revolutionise-uk-capital-markets-and-boost-london-listings/
https://www.gov.uk/government/news/dan-corry-appointed-to-lead-defra-regulation-review
https://assets.publishing.service.gov.uk/media/670cde8692bb81fcdbe7b745/industrial-strategy-green-paper-final.pdf
https://www.ukib.org.uk/
https://www.british-business-bank.co.uk/finance-providers-equity-finance/british-growth-partnership
https://www.linkedin.com/posts/bvca_a-significant-step-forward-for-investment-activity-7251635037433991168-ztWw/
https://www.theglobalcity.uk/PositiveWebsite/media/Research-reports/Scaling-Transition-Finance-Report.pdf
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32023H1425
https://www.ft.com/content/c0ca95ce-ffcf-4c10-b789-174e359e16ef
https://player.captivate.fm/episode/457a3e0b-8938-43d1-8590-64e33625b7c0/
https://url.uk.m.mimecastprotect.com/s/VBJCC8p4c9q036txt0FyxU-_?domain=sites-traverssmith.vuturevx.com
Welcome to the fifth episode in our Sustainability Insights ... in conversation series.
In the fifth episode of our Sustainability Insights … in conversation series, where we discuss the role of responsible investment in improving risk-adjusted returns, in aligning values, and in solving real world problems.
Does Sustainable Investing Work?
In this week's issue of Travers Smith's Alternative Insights, we are looking at we are looking at the EU AI Act, and its likely impact on the attractiveness of the EU as a hub for Artificial Intelligence.
Links:
https://academic.oup.com/book/36491
https://digital-strategy.ec.europa.eu/en/policies/european-approach-artificial-intelligence
https://www.theguardian.com/books/2023/sep/02/i-hope-im-wrong-the-co-founder-of-deepmind-on-how-ai-threatens-to-reshape-life-as-we-know-it
https://oecd.ai/en/ai-principles
https://www.esma.europa.eu/sites/default/files/2024-05/ESMA35-335435667-5924__Public_Statement_on_AI_and_investment_services.pdf
https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-alternative-insights-financial-regulation-and-ai/
https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-alternative-insights-financial-regulation-and-ai/
https://www.gov.uk/government/consultations/ai-regulation-a-pro-innovation-approach-policy-proposals/outcome/a-pro-innovation-approach-to-ai-regulation-government-response
http://opiniojuris.org/2020/11/25/the-time-has-come-for-international-regulation-on-artificial-intelligence-an-interview-with-andrew-murray/#:~:text=I%20would%20much%20prefer%2C%20if%20possible%2C%20if%20this%20was%20a%20truly%20international%20(UN%2Dled%2C%20for%20example)%20exercise%20wherein%20countries%20like%20China%20are%20on%20board%20and%20not%20feeling%20coerced%20into%20adopting%20something
In this week's issue of Travers Smith's Sustainability Insights we are looking at Mario Draghi's report on EU competitiveness and its potential impact on sustainability regulation for private capital firms
Links:
https://commission.europa.eu/document/download/97e481fd-2dc3-412d-be4c-f152a8232961_en
https://www.ft.com/content/298008a0-b75d-4062-9cb1-86b12ac30fbd
https://commission.europa.eu/document/download/ec1409c1-d4b4-4882-8bdd-3519f86bbb92_en
https://ec.europa.eu/commission/presscorner/detail/en/IP_00_96
https://www.epc.eu/content/PDF/2024/20230277_hidden_champions_missed_opportunities_en.pdf
https://www.traverssmith.com/knowledge/knowledge-container/new-mandatory-tcfd-reporting-for-more-uk-companies/
https://commission.europa.eu/system/files/2023-03/Communication_Long-term-competitiveness.pdf
https://doi.org/10.1093/jfr/fjac001
https://link.springer.com/article/10.1007/s11142-021-09609-5
https://www.bvca.co.uk/Portals/0/BVCA%20Response%20to%20FRC%20UK%20SD%20TAC%20CfE.pdf
https://commission.europa.eu/document/download/e6cd4328-673c-4e7a-8683-f63ffb2cf648_en?filename=Political%20Guidelines%202024-2029_EN.pdf
In this week's issue of Travers Smith's Alternative Insights, we are looking at we are looking at NAV lending to private equity funds, and ILPA's recently issued guidance.
Links:
McKinsey's 2024 Global Markets Review
ILPA guidance on continuation funds
ILPA review of its highly impactful reporting template
ILPA guidance on NAV-based facilities
Financial Stability Report
BVCA pointed out
ILPA Guidance
Welcome to the third episode in our Sustainability Insights ... in conversation series.
In the fourth episode of our Sustainability Insights … in conversation series, Simon Witney speaks to Diandra Soobiah, Director of Responsible Investment at Nest, the National Employment Savings Trust. Their discussion explores Nest's significant commitments to the private markets and, with 15% of NEST's £42 billion AUM allocated to private markets, Diandra explains what more she wants to see from the sector.
In this week's issue of Travers Smith's Alternative Insights, we are looking at trends in the private markets as discussed at our third annual Alternative Insights Summit in June.
In this week's issue of Travers Smith's Alternative Insights, we are looking at trends in the private markets as reported by the keynote speaker at our recent summit.
Links:
https://www.bain.com/insights/topics/global-private-equity-report/
https://www.collercapital.com/coller-capitals-40th-global-private-capital-barometer-summer-2024/
In this week's issue of Travers Smith's Sustainability Insights we are looking at the future for UK sustainability policy.
We have released the third episode in our podcast series Sustainability Insights … in conversation. In conversation with Simon Witney, Ellen De Kreij, lead advisor to Apax’s Operational Excellence Practice on Impact and Sustainability, explains how Apax selects impact investments, how they work with management to promote impact, and how they report on impact to their investors.
Listen to the conversation here, and please subscribe to receive future editions in this podcast series direct to your inbox.
Links:
https://www.cer.eu/insights/what-will-eu-election-results-mean-europe
https://uksif.org/wp-content/uploads/2023/08/Letter-to-PM-on-NZ-commitment-Aug23-UPDATED.pdf
https://www.gov.uk/government/news/uk-becomes-first-major-economy-to-pass-net-zero-emissions-law
https://www.gov.uk/government/news/plans-unveiled-to-decarbonise-uk-power-system-by-2035
https://www.gov.uk/government/news/uk-enshrines-new-target-in-law-to-slash-emissions-by-78-by-2035
https://www.gov.uk/government/publications/net-zero-strategy
https://www.traverssmith.com/knowledge/knowledge-container/biodiversity-net-gain
https://www.bbc.co.uk/news/articles/cw44vj3e1wyo
https://www.traverssmith.com/knowledge/knowledge-container/sustainability-disclosure-requirements-sdr-and-investment-labels-the-new-rules/
https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-sustainability-insights-the-european-commissions-review-of-sfdr/
https://www.greenfinanceinstitute.com/wp-content/uploads/2023/10/GTAG-Chair-Final-Statement.pdf
https://committees.parliament.uk/publications/43465/documents/216119/default/
https://www.traverssmith.com/knowledge/knowledge-container/the-carbon-border-adjustment-mechanism-recap-and-updates/
https://www.gov.uk/gov
https://betterbusinessact.org/ernment/consultations/addressing-carbon-leakage-risk-to-support-decarbonisation
https://www.bbc.co.uk/news/uk-politics-68244772
https://www.bvca.co.uk/Portals/0/Documents/Research/2024%20Reports/BVCA-Manifesto-For-Growth.pdf
https://labour.org.uk/wp-content/uploads/2024/01/Financing-Growth.pdf
Our third episode of Sustainability Insights… in conversation focuses on impact and what it means to Apax Partners. Ellen De Kreij is lead advisor to the Operational Excellence Practice on Impact and Sustainability and is a true expert in the Impact field. Together with Simon Witney from Travers Smith's ESG & Impact team, Ellen and Simon discuss how Apax select impact investments, how they marketed their impact fund, and how they demonstrate the impact that they and their portfolio companies are having.
Apax were quite the early movers in the impact space, having started to focus on their portfolio companies' footprints in 2012, and over the years have exemplified the power of the private markets when thinking about impact and sustainability.
In this week's issue of Travers Smith's Alternative Insights, we are looking at the diverging path of private funds regulation in the US and the EU.
Links:
https://www.traverssmith.com/knowledge/knowledge-container/sec-finalises-private-fund-adviser-rules/
https://www.traverssmith.com/knowledge/knowledge-container/aifmd-ii-the-next-phase-of-eu-alternative-investment-fund-regulation/
https://www.ft.com/content/a3138e87-1e8b-494b-80c3-7361c554b379
https://www.bvca.co.uk/Portals/0/Documents/Policy/Submissions/220425%20BVCA%20response%20to%20SEC%20private%20fund%20adviser%20proposals.pdf
https://ilpa.org/quarterly-reporting-standards/
https://ilpa.org/wp-content/uploads/2024/06/ILPA-Launches-Comment-Period-for-Quarterly-Reporting-Standards.pdf
In this week's issue of sustainability insights we are looking at the latest EU rules on fund names and greenwashing.
In this week's issue of Travers Smith's Alternative Insights, we are looking atArtificial Intelligence, and the opportunities it offers for asset managers.
FCA's AI update: AI Update (fca.org.uk)
Our note on the FCA's update The FCA and Bank of England's "strategic approach" to AI – what it means for regulated firms | Travers Smith
In this week's issue of sustainability insights we are looking at the UK's latest clampdown on greenwashing.
Links:
Sustainability Disclosure Requirements - Our detailed analysis of the guidance is here
FCA has also issued detailed guidance
Feedback from the BVCA
FCA CP24/8: Extending the SDR regime to Portfolio Management
Our second episode of Sustainability Insights … in conversation charts Kristen Weldon's journey to natural capital in private markets. Simon Witney and John Buttanshaw from Travers Smith's ESG team talk to Kristen about the importance of nature and biodiversity, explore some of the investible opportunities for the private markets, and discuss UK and EU legal and regulatory initiatives.
In this week's issue of Alternative Insights, we are looking at the UK's attempts to get defined contribution pension schemes to invest in private funds.
In this week's issue of Sustainability Insights, we are looking at Labour law reforms across the UK and Europe in light of upcoming elections.
Links:
- TUC - "The biggest upgrade of workers’ rights in a generation"
- IER - CBI lobbying to ‘soften’ Labour’s workers’ rights pledges, FT reports.
- FT - Keir Starmer seeks to reassure business over Labour’s worker rights pledges
- IER - Row rumbles on as business leaders line up against a 'full fat' New Deal for workers - IER
- European Commissions - Social Europe: More transparent and predictable working conditions for workers in EU
- European Council - Platform workers: Council confirms agreement on new rules to improve their working conditions
- FCA proposals for asset managers
- US FTC proposed ban on employers imposing non-competes on employees
- UK government's Department for Business & Trade 'Non-Compete Clauses'
- Raconteur - is this the death of the non-compete clause?
- The Hill - 'Banning non-compete agreements hurts US companies and workers'
- CMA research report on competition and market power in UK labour market
- SHRM - ' Will the FTC Finalize a Compete Ban on Noncompetes?'
In this week's issue of Travers Smith's Alternative Insights we are looking at the European Commission's recent policy brief reviewing the first 100 days of the EU's Foreign Subsidies Regulation.
Links:
EU's new Foreign Subsidies Regulation
Travers Smith's Alternative Insights: The impact of the EU's new rules on foreign subsidies
The European Commission's recent policy brief
In this week's issue of Sustainability Insights, we are looking at European supply chain due diligence requirements including the fate of the EU's CS3D.
Links:
Aligning the EU Due Diligence Directive with the International Standards: Key Issues in the Negotiations
FT article - France seeks weaker EU due diligence rules for banks
Forecast for 2024 European Parliament elections
European lawmakers reached an in-principle agreement on the Commission's 2022 proposal to ban products from the EU market that are made with forced labour
US Uyghur Forced Labor Prevention Act
Call for evidence issued by an influential Parliamentary Committee
Our recent note on similar European rules
OECD Due Diligence Guidance for Responsible Business Conduct
Business and Human Rights Resource Centre - UK: Update - 50 businesses sign statement calling for human rights due diligence legislation
Our briefing - "Value chain" negligence claims: the door has been opened
Our ESG risk map
In the 73rd issue of Travers Smith's Alternative Insights, we are looking at subscription line financing and the emerging role of rating agencies.
Links:
- An analysis by Blackrock
- ILPA's guidelines issued in 2017
- In 2022, Citi was reported to have scaled back its lending by over two-thirds
- Rating agencies (GLI Fund Finance 2024 - Rated subscription lines: An emerging solution tot he liquidity crunch | Travers Smith)
We launched a new podcast series in February: Sustainability Insights … in conversation. In the first edition, Simon Witney discussed topical issues – including the global ESG landscape and responsible AI – with Cornelia Gomez, Global Head of ESG at General Atlantic.
Listen to the podcast here, and sign up here if you want the second edition to land in your inbox.
Listen to a discussion between Travers Smith's Simon Witney and Cornelia Gomez, Global Head of ESG at General Atlantic. Simon and Cornelia discuss the outlook for regulation in 2024, differing global perspectives on sustainability, and responsible AI.
In this week's issue of Sustainability Insights, we are looking at corporate governance and reporting in EU portfolio companies.
We are launching a new podcast series in February: Sustainability Insights … in conversation. In the first edition, Simon Witney will discuss topical issues, including the global ESG landscape and responsible AI, with Cornelia Gomez, Global Head of ESG at General Atlantic. Sign up on our website (www.traverssmith.com) and it will land in your inbox next week.
Links:
- The EU's Corporate Sustainability Reporting Directive
- PERG – the Private Equity Reporting Group
- The PwC analysis of good practice
- The Walker Guidelines commissioned by the BVCA and written by Sir David Walker in 2007
- TCFD further reforms announced and then ditched, following a call for evidence to gather ideas for simplifying the rules
- This year's PERG report
- The UK's Financial Reporting Council's review of reporting by the UK's largest private companies
- FRC's Guidance on the Strategic Report and Thematic review of climate-related metrics and targets
- The Wates Corporate Governance Principles for Large Private Companies, the UK Corporate Governance Code itself (amended this year, and with updated guidance) and the CGI model terms of reference for an ESG Committee
- "Section 172" statement
- ESG Footprints in Private Equity Portfolios: Unpacking Management Instruments and Financial Performance
In this week's issue of Travers Smith's Alternative Insights week we are looking at what is in store for 2024.
In this week's issue of Travers Smith's Alternative Insights, we are looking at ESMA's proposed implementing rules for the European Long Term Investment Fund, or ELTIF, and how they match up to the needs of sponsors.
In this week's issue of Travers Smith's Sustainability Insights week we are looking at the UK's new disclosure and labelling regime for asset managers and its impact on private capital firms.
In this week's issue of Travers Smith's Alternative Insights, we are looking at the UK's 2023 Autumn Statement.
In this week's Issue of Travers Smith's Sustainability Insights, we are looking at the prospect of a complete overhaul of the EU's SFDR.
In this week's issue of Travers Smith's Alternative Insights, Travers Smith Funds partner Tosin Adeyeri and Tax partner Elena Rowlands sat down to discuss 'tax hot topics' and the UK tax landscape in a post-Brexit world.
In this week's issue of Travers Smith's Sustainability Insights week we are looking at the UK's proposed new rules on Diversity and Inclusion for regulated financial firms.
In this week's issue of Alternative Insights we are looking at the impact and regulation of private debt funds.
In this week's issue of Sustainability Insights, we are at why it's important to manage competition law and antitrust risks when signing-up to industry-wide ESG collaborations and collective pledges.
In this week's issue of Alternative Insights we are looking at some important new EU regulations on foreign subsidies that will affect many large M&A deals.
In this week's issue of Sustainability Insights, we are looking at new international sustainability reporting standards.
In this week's issue of Alternative Insights, we are looking at the latest ILPA guidelines on the use of continuation funds.
In this week's issue of Sustainability Insights, we are looking at the new UN PRI guidance on human rights due diligence on private markets.
This week we are looking at the evolution of retail fund regulation in the EU – and its impact on private markets firms.
In this week's issue of Sustainability Insights, we are looking at the prospect of yet more UK sustainability regulation and the UK's reaction.
In this week's Alternative Insights, we are looking at the role of regulators in M&A transactions.
In this week's issue of Sustainability Insights, we are looking at some important recent developments in sustainability regulation in Europe.
In this week's issue of Alternative Insights, we are looking at the impact of the EU's new foreign subsidies regulation on private equity deals.
This week we are looking at developments in retailisation in private markets. In particular, we consider the future of the ELTIF, and discuss some emerging European Commission proposals to enhance protections for retail investors.
In this week's Alternative Insights, we are looking forward to the key themes for 2023, following an event we held in London on Wednesday and the launch of our new annual Insights publication.
"But too much change, too quickly is both overwhelming and dangerous, and the UK's reputation for sound and effective rulemaking needs to be re-established."
In this week's issue of Alternative Insights, we look at how the UK government and regulators are approaching post-Brexit reforms.
A regular audio briefing for the alternative asset management industry - Issue 40. Earlier this month, the FCA, the UK regulator, https://www.fca.org.uk/publications/discussion-papers/dp21-4-sustainability-disclosure-requirements-investment-labels (announced) that its consultation on a sustainability disclosure and labelling regime for asset managers and regulated asset owners would be delayed until the autumn. While it is clearly important to take the time needed to get these complex rules right, many firms will be disappointed by the delay. They have been waiting to see what the UK's equivalent of the EU's Sustainable Finance Disclosure Regulation (SFDR) will look like. The UK has made the right decision, confirmed in a https://www.fca.org.uk/publication/discussion/dp21-4.pdf (discussion paper issued last year), to separate its sustainability disclosure rules from its proposed fund labels. Unlike the SFDR, the UK intends to lay down minimum standards for "green" investment products from the outset, so that investors can rely on the labels when making investment decisions. Some fund managers have welcomed the prospect of a specific "impact fund" label. If appropriately defined, an impact-specific label could be helpful in the fight against "impact-washing", and might give investors greater confidence that their investments will actually deliver positive outcomes. But coming up with an appropriate definition is not easy. Last month we hosted a https://www.traverssmith.com/knowledge/knowledge-container/webinar-the-regulation-of-impact-funds-in-the-eu-and-uk/ (webinar) to debate how regulators should seek to define impact – and then, importantly, how to police it. To some investors, the EU SFDR's "Article 9" category looks like a proxy for an impact fund, but – as https://www.finance-watch.org/publication/joint-ngos-and-consumer-recommendations-for-minimum-criteria-for-art-8-9-sfdr-products/ (Finance Watch and other NGOs have pointed out) – there are no objectively set minimum standards under Article 9. It is true that the https://www.traverssmith.com/knowledge/knowledge-container/sustainable-finance-disclosure-regulation-sfdr-commission-guidance/#thescopeof6 (regulatory guidance) strongly suggests that all investments made by an Article 9 product must be categorised as "sustainable" by the fund manager (subject to very limited exceptions), but considerable doubt remains about the definition of a "sustainable investment" – and different firms are taking very different approaches. That means many true impact funds may conclude that they fail to qualify under Article 9, especially in light of a renewed focus on greenwashing risks. One issue is that the SFDR does not (yet) make clear whether transitional assets – for example, those that are in hard-to-abate sectors such as cement manufacturing – can qualify for inclusion in an Article 9 portfolio, nor whether it makes a difference if the activities concerned are, like https://protect-eu.mimecast.com/s/8SgNCW54fPEmgMUBV0Vc?domain=sites-traverssmith.vuturevx.com (cement production), eligible for alignment with the EU Green Taxonomy. For socially sustainable investments, firms don't even have a taxonomy to guide them, and are given considerable scope to determine which social outcomes qualify as "sustainable". (An EU social taxonomy is https://protect-eu.mimecast.com/s/Qs5pCXg4sqQoy8FxECkr?domain=sites-traverssmith.vuturevx.com (in development), but seems several years away from being finalised.) At the same time, https://protect-eu.mimecast.com/s/II-WCYjgTN72JnFrgLPN?domain=sites-traverssmith.vuturevx.com (more recent guidance) suggests that a fund should not use the word "impact" in its name unless the fund's investments "are made with the intention to generate positive, measurable social and environmental...
A regular briefing for the alternative asset management industry. It has been clear for some time that regulators are concerned about "greenwashing", by which they mean the risk that companies, investors and asset owners will overstate their sustainability credentials in order to attract capital. But, in the last few weeks, the regulatory pressure has significantly increased. Recent announcements from the SEC, the US regulator, and ESMA, the pan-EU supervisor, will focus the minds of all asset managers, including those running private funds. In the US, proposed new https://www.sec.gov/news/press-release/2022-92 (SEC rules for ESG disclosures) by investment advisers will buttress an already https://www.sec.gov/news/press-release/2021-42 (sharp focus on sustainability claims) by the Division of Enforcement. The SEC's https://www.sec.gov/rules/proposed/2022/ia-6034.pdf (proposal), published on 25 May, is designed to "promote consistent, comparable, reliable – and therefore decision-useful – information for investors". It will apply to all SEC-registered advisers but also (to a more limited extent) to "exempt reporting advisers", a category that includes many European firms with US investors. The change would be to Form ADV – the annual filing that investment advisers (including private fund advisers) are required to make – and would require detail on an adviser's use of "ESG factors", which are not themselves defined, as well as disclosure of third party frameworks that it uses and relationships with "related persons" who are ESG service providers. In some respects the SEC's proposals resemble the EU's Sustainable Finance Disclosure Regulation (SFDR): the US rules would require firms to categorise their investment products according to whether they "integrate" ESG factors alongside other (non-ESG) factors; whether they are "ESG-Focused", using one or more ESG factors as a "significant or main consideration in selecting investments or engaging with portfolio companies"; or whether they adopt an "ESG-Impact" strategy, and therefore target portfolio investments that drive specific and measurable environmental, social, or governance outcomes. Like the SFDR, these categories determine disclosure requirements, but are not labels: they do not guarantee any particular investment strategy or minimum ESG standards. It will be important, therefore, for the SEC to ensure that investors do not come to regard the categories as if they were labels – a significant problem with the EU rules, acknowledged by the EU regulators. But, although the scope of "ESG" is not defined in the currently proposed SEC rule, the three product categories seem clearer and easier to understand than their SFDR-equivalents. In fact, despite that similarity, the SEC's proposals for private fund advisers are much less extensive than those which apply under the SFDR. Indeed, they are also less extensive than other SEC proposals (included in the same release) for US registered investment companies and business development companies. The additional information that needs to be provided in the Form ADV should help investors to understand the sustainability features of an investment product, and help the SEC to enforce its prohibition on misleading investors, but does not extend to detailed metrics or anything close to EU Taxonomy-style reporting. The focus on "greenwashing" may be acute, but investors have largely been left to define the detail of the required reporting for themselves. Meanwhile in Europe last week, ESMA issued a wide-ranging "https://www.esma.europa.eu/sites/default/files/library/esma34-45-1427_supervisory_briefing_on_sustainability_risks_and_disclosures.pdf (Supervisory Briefing)" that stressed the need for EU national regulators to look hard at compliance with the SFDR. When taken together with...
A regular audio briefing for the alternative asset management industry. Just about everyone agrees that a single set of internationally accepted sustainability disclosure standards would benefit all stakeholders. But global convergence creates significant challenges. For example, policymakers who are keen to set very high standards – the EU, for example – will be tempted to goldplate any requirements that can achieve widespread approval. That's especially likely because different stakeholders have different expectations, and some jurisdictions will want to satisfy a wide range of constituencies. Moreover, achieving widespread buy-in requires extensive consultation and due process, which takes longer than many are willing to wait. When the International Sustainability Standards Board (ISSB) was https://protect-eu.mimecast.com/s/1P9uCOW4I0M0g4fr8Ty2?domain=sites-traverssmith.vuturevx.com (established last year), its goal was ambitious: to create a global baseline for corporate reporting, and to do it quickly. https://protect-eu.mimecast.com/s/rVHLCP04FoPo2Mf6C09z?domain=sites-traverssmith.vuturevx.com (Publication in March) of two consultation draft standards, one on https://protect-eu.mimecast.com/s/1gm6CQY4i3Y3KrSA6TM_?domain=sites-traverssmith.vuturevx.com (general requirements for sustainability disclosures) and the other covering https://protect-eu.mimecast.com/s/h42oCRZ9TRxRpBTQRprb?domain=sites-traverssmith.vuturevx.com (climate-specific risks and opportunities), is a big step forward. When the standards are finalised – which could be as soon as the end of this year – they will encourage many companies to make a step change in sustainability reporting. It will be up to individual countries to decide whether to mandate the finalised standards, and for which companies. Some will do so quickly: UK policymakers, for example, have already said that they will use the ISSB's standards as the "backbone" for https://protect-eu.mimecast.com/s/PwxHCV46u5Y5E9CE05FV?domain=sites-traverssmith.vuturevx.com (UK corporate sustainability reporting requirements), perhaps, in time, applying them to large private companies as well as their listed counterparts. Other standard-setters, including https://protect-eu.mimecast.com/s/8_AvCW54fPVPQGCO8RiR?domain=sites-traverssmith.vuturevx.com (EFRAG) in the EU – which has just launched its own https://protect-eu.mimecast.com/s/1ZWLCXg4sqWqg0CQh0l_?domain=sites-traverssmith.vuturevx.com (consultation on sustainability reporting standards) – will take careful note, even if they ultimately opt for some divergence, as the EU certainly will. The ISSB has been acutely aware of the challenges in delivering a globally accepted framework, and explicitly recognises that its standards will not be the complete answer. That's at least in part because it adopts a "materiality" rule: disclosures are only required when they are relevant to an entity's enterprise value. The standards will require companies to provide the information required by investors. Reports will not include the external impacts of corporate activity unless they have a financial impact on the entity. This approach is not as narrow as it might appear: it is clear from the drafts that a very wide range of matters could be "material", including (for example) corporate reputation, longer-term regulatory risks, the stability of a company's workforce, and its "relationships with local communities and natural resources". Disclosures are therefore expected in relation to (among many other things) an entity's employment practices and those of its suppliers, wastage related to the packaging of the products it sells, events that could disrupt its supply chain, and any sustainability-related risks in the company's value chain. Nevertheless, the ISSB also recognises that there are limitations with its approach. Many jurisdictions (including the UK and the EU) will go further and extend the requirements to capture...
A regular briefing for the alternative asset management industry - Issue 34 Towards the end of last year, many private fund managers began reviewing their approach to interest rate risks. Although private funds are often heavily exposed to movements in interest rates – most obviously in relation to leveraged portfolio investments, but also for fund-level facilities and manager-level liquidity – low and stable rates have been the norm for the past 10 years, making interest rate risk a relatively low priority. That has clearly changed: central bank announcements warning of phased increases in interest rates, along with governmental pressure to combat rising inflation, have prompted many funds to consider how to hedge against future rises. A firm's review of its approach to interest rate risks is likely to start with an assessment of its own knowledge and skills. Fund managers – and portfolio company finance teams – clearly need to model the impact of expected future rate rises on returns and liquidity needs, but also need to understand the tools that are available to manage the risks, and the circumstances in which they can be deployed. That is partly about making sure the firm has the right expertise (internally or externally) to identify, and then negotiate terms for, the instruments that can ensure that risks are appropriately hedged. It will also be important for the firm to analyse the regulatory framework that applies to the use of any derivatives for hedging – including restrictions and additional reporting requirements imposed by both specific derivatives rules such as https://ec.europa.eu/info/business-economy-euro/banking-and-finance/financial-markets/post-trade-services/derivatives-emir_en (EMIR), and by more general pan-European legislation, most obviously the AIFMD and MiFID (and their UK equivalents). Any provisions on hedging (or related aspects, such as fund guarantees) in the fund's Limited Partnership Agreement (LPA) will need to be navigated, and the impact of hedging at fund-level on the borrowing base under a fund-level facility fully understood. Managers seeking interest rate protection by accessing the bank and broker-led markets will need to put in place appropriate legal agreements, so an understanding of current ISDA terms and model documents is needed. These are specialist documents, and a firm's regular fund formation or fund finance counsel may not be familiar with the detailed provisions or market practices. Therefore, managers should not underestimate the time that it can take to agree them, especially because they should be tailored to the specific fund. Establishing or reviewing policies and procedures for interest rate risk management will require firms to address questions of responsibility and accountability among the portfolio management, legal and compliance and finance teams.It is likely that some of these required skill sets and advisory relationships will need refreshing. Establishing or reviewing policies and procedures for interest rate risk management and the use of derivatives will flush out gaps and will require firms to address questions of responsibility and accountability among the portfolio management, legal and compliance and finance teams. Such clear procedures are vital and, indeed, investors may be expected to ask more questions about them as we enter a higher interest rate environment. Some managers, recognising the specialist skills needed, have sought to implement systematic interest rate risk management on a centralised basis across their portfolio. This marks a change to the more traditional approach where interest rate risk management was delegated to the underlying investee companies and portfolio manager, rather than being subject to centralised modelling and oversight. While centralisation does bring some advantages, there are also challenges to address: for example, the portfolio manager and portfolio company finance director will know the underlying...
The European Commission's renewed https://ec.europa.eu/commission/presscorner/detail/en/ip_21_3405 (Sustainable Finance Strategy), adopted in July 2021 and building on ahttps://ec.europa.eu/info/publications/sustainable-finance-renewed-strategy_en#action-plan ( 2018 Action Plan), was certainly ambitious. Indeed, the Commission has rightly credited the EU with "global leadership in setting international standards". But blazing a trail in a complex and novel regulatory field is a double-edged sword: there are bound to be missteps and – as asset managers will testify – the EU's rules have given rise to a number of challenges. Understanding and applying the complex and (in places) poorly drafted rules is, perhaps, the main challenge for firms (although final proposed versions of the Sustainable Finance Disclosure Regulation's (SFDR's) implementing rules – https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/sustainability-related-disclosure-financial-services-sector_en (published this week) – will help), while regulators and NGOs have expressed concern that the disclosure regime might actually exacerbate "greenwashing". The Taxonomy – a centrepiece of the EU's sustainable finance strategy – is narrow in scope and is clearly only a starting point. Emerging rules on https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-sustainability-insights-the-impact-of-the-eus-sustainability-reporting-proposals-on-private-companies/ (corporate disclosures) will be burdensome, while a proposal on https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-sustainability-insights-european-commission-proposal-on-mandatory-due-diligence/ (sustainability due diligence) has come in for significant criticism. It is to be expected, therefore, that the European Commission will have to amend, evolve and clarify its new rules in some important respects in the coming years. ESMA, the pan-EU supervisor, recently explained how it is going to help – and its https://www.esma.europa.eu/sites/default/files/library/esma30-379-1051_sustainable_finance_roadmap.pdf (Sustainable Finance Roadmap) offers alternative asset managers some clues about what is likely to change in the near future. ESMA's roadmap, published in February and building on the Commission's own priorities, points out that it must respond to "copious legislative activity" and "strong investor demand for sustainable products". Combating greenwashing and promoting transparency is clearly regarded as a central part of ESMA's mission – and the SFDR's de facto labels are identified as part of the problem. The European Commission has already announced that it will develop minimum standards for "Article 8 products" – those that promote environmental and/or social characteristics – and ESMA plans to support the Commission's work in this regard. The lack of minimum standards is perhaps not surprising in a disclosure regime, but baseline criteria would seem to be a prerequisite for a label. In fact, ESMA has been adamant on a number of occasions that the SFDR is not a labelling regime, and the supervisor is aware that – if it is seen as such by investors – it could result in investors being misled. But there is also a https://www.esma.europa.eu/sites/default/files/library/esma34-466-282_natasha_cazenave_keynote_speech_at_ici_investment_management_conference_2022.pdf (recognition among policymakers) that – whether intended or not – the SFDR's categories are being used as labels, and moving to underpin them with some minimum standards is now the inevitable response. That view is shared by a group of NGOs and consumer organisations, who issued https://www.finance-watch.org/wp-content/uploads/2022/02/2022.02.21-Joint-NGOs-and-consumer-recommendations-for-minimum-criteria-for-Art.-8-9-products.pdf (recommendations for minimum criteria) in February. The NGOs'...
A regular briefing for the alternative asset management industry - Issue 32 Last month, the UK government made some https://protect-eu.mimecast.com/s/IOIBCjEDS31EBoi7ZQKy?domain=sites-traverssmith.vuturevx.com (important announcements) about its post-Brexit plans to re-vamp the funds regime. Many alternative asset managers will be disappointed that a number of industry suggestions have not (yet) been taken up. For the last two years, the Treasury has been reviewing the UK funds regime. Its aim is to make the UK "a more attractive location to set up, manage and administer funds and to support a wider range of more efficient investments better suited to investor needs". This review had already yielded some tangible results: in particular, the recent introduction of the https://protect-eu.mimecast.com/s/7KUoCkGEsr3lK2iJAae1?domain=sites-traverssmith.vuturevx.com (Long-Term Asset Fund) (LTAF) and the development of a promising https://protect-eu.mimecast.com/s/AQOfClJGuAqGVRtYfBQR?domain=sites-traverssmith.vuturevx.com (new tax regime for qualifying asset holding) companies (QAHCs) which will come into force in April. In addition, the latest announcements confirmed that the government is taking forward a new fund structure, the Professional Investor Fund – which will be welcome news in the real estate funds industry. However, for most private fund managers, there was not much to write home about. The government's latest publication follows a https://protect-eu.mimecast.com/s/SHqtCmKJSALXgytNJm-N?domain=sites-traverssmith.vuturevx.com ("call for input"), issued in January 2021, seeking stakeholder feedback on potentially wide-ranging tax and regulatory reforms. The government received input from across the asset management sector, including from https://protect-eu.mimecast.com/s/QmSjCnLKhKpwP9f0TO4y?domain=sites-traverssmith.vuturevx.com (Travers Smith), with suggestions ranging from reforms to limited partnership law to recommendations for VAT on fund management fees. Having considered these responses, the government has now made clear which suggestions it will take forward – and those which it will not. It is fair to say that a number of helpful initiatives were confirmed in the February announcements. For example, the government remains committed to work that should facilitate uptake of the LTAF. This could be a useful structure for private funds that wish to access capital from defined contribution pension schemes, insurers, and wealthy individuals but – as the government acknowledges – establishment of the structure is only the first step. The ongoing workstreams include assessment of the case for further changes to the tax rules, and regulatory reforms to facilitate distribution to a wider range of retail investors. In addition, and very importantly for real estate funds, the government says that it will create a new form of unauthorised fund, which would be suitable for professional investors. This "Professional Investor Fund", https://protect-eu.mimecast.com/s/ba5QCoMLcBp9g2S2Jum2?domain=sites-traverssmith.vuturevx.com (advocated by industry experts and associations), will be an onshore closed-ended or hybrid vehicle for institutional investors – but, although available for other underlying assets, it will be mainly of interest to funds holding UK real estate. The government further confirmed that helpful changes to the rules for Real Estate Investment Trusts (REITs) are also under active consideration, in addition to those already coming into effect next month. Meanwhile, many other ideas were put on ice or rejected altogether – perhaps most significantly a suggestion to zero-rate VAT on management fees. Although restating a commitment to publish a consultation on the VAT treatment of fund management fees in the coming months, the government has concluded that it will
A regular briefing for the alternative asset management industry - Issue 31 At the end of last month, the European Commission unveiled its https://www.traverssmith.com/knowledge/knowledge-container/corporate-sustainability-due-diligence-a-long-awaited-proposal-revealed/ (much-delayed plan) to require companies doing business in the European Union to undertake far-reaching sustainability due diligence throughout their supply chain. https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1145 (Heralded by the Commission) as "a game-changer" which will "project European values on value chains", the proposal has already https://interdependencecoalition.eu/the-european-commission-has-missed-an-opportunity-to-make-history-with-its-proposal-on-corporate-sustainability-due-diligence/ (drawn fire for not going far enough). Critics have pointed out that the new rules will only apply to the very largest companies, and do not significantly extend directors' fiduciary duties. The Commission has apparently decided that a less ambitious proposal will improve its chances of getting legislation in place quickly – perhaps even by the end of this year. The proposal will now be negotiated with the Parliament and the Council (made up of the EU's 27 member states) and the final rules will almost certainly change during that process. However, the Parliament and the Council will be supportive: they have both called on the Commission to come forward with this proposal, and some member states – including France and Germany – have already introduced their own supply chain due diligence rules. Notwithstanding the criticisms, the Commission's proposals are radical because they would require companies in scope, which will include some asset managers and many non-EU companies, to operate an ongoing process to identify – and then prevent, end or mitigate – actual and potential adverse human rights and environmental impacts across their "value chain" (including anyone, upstream or downstream, with whom they have an "established business relationship)". There is also a requirement for some large companies (again, potentially including asset managers) to prepare a plan to ensure that their business strategy is compatible with the goals of the Paris Agreement. These rules would go much further than, for example, the corporate reporting obligations under the UK's Modern Slavery Act – especially since the Commission envisages that national authorities would monitor compliance and sanction companies who are in default. Much more significantly, outsiders affected by any adverse impacts that were not identified or mitigated as a result of a failure to comply with the law would be able to bring a claim for damages against the company for any losses suffered as a result. That could be a game-changer. Although the Commission's proposal will directly affect fewer companies than it had originally proposed, https://protect-eu.mimecast.com/s/PamLC05QfMjWlwSrjZNR?domain=sites-traverssmith.vuturevx.com (it is estimated that) around 9,400 public and private EU companies will meet the threshold of more than 500 employees and €150 million net worldwide turnover. In addition, roughly 3,400 EU companies operating in high impact sectors will be caught at a later stage, and thousands of non-EU companies will be caught (including, for example, UK- and US-based alternative asset managers and investment firms) if they meet the relevant turnover threshold based on the extent of their business in the EU. Of course, this scope understates the impact of the proposal because large companies deal with small companies and those larger companies will, no doubt, look to their suppliers and contractors to help them to discharge their responsibilities – and perhaps shoulder some of the liability risk. In fact, the Directive specifically contemplates that companies should obtain "contractual assurances" from business partners and then...
It is no surprise that the US Securities and Exchange Commission – now led by Gary Gensler, the Chair appointed last year by the Biden administration – has made proposals to increase the regulation of private fund managers (or "investment advisers"). But perhaps it is surprising that that the https://www.sec.gov/rules/proposed/2022/ia-5955.pdf?domain=sites-traverssmith.vuturevx.com (rules proposed earlier this month) could have an important impact on many European firms, as well as those in the US. While there is likely to be significant market push-back to some of the mooted rule-changes which, among other things, challenge well-established and heavily negotiated risk allocations agreed with sophisticated investors, the SEC seems to be signalling that protection of institutional investors is now firmly within its remit. And, importantly, non-US "exempt reporting advisers" (or ERAs) are in scope of some of the most dramatic changes. Many non-US firms who raise funds from US investors are classified as exempt reporting advisers because they have their principal place of business outside of the US, their only US "clients" are private funds, and all assets managed by the firm from a location in the US (if any) are solely attributable to private funds and total less than $150 million. ERAs must make regular public SEC filings containing a limited amount of information (at least annually), and are subject to a reduced set of SEC rules. Some of the most controversial proposals made by the SEC – specifically, the changes that are included under the headings "Preferential Treatment" and "Prohibited Activities" – would apply to all private fund advisers, including ERAs, with no grandfathering for existing funds. The "Preferential Treatment" rule would prohibit certain arrangements with particular investors (for example, in a side letter) that the SEC regards as detrimental to other investors in the fund, such as preferential redemption and transparency rights that would have a “material negative effect on other investors in the private fund”. The Preferential Treatment rule would also require additional disclosure of other preferential terms, with that disclosure being provided pre-commitment to prospective investors, and annually to existing investors. The proposed "Prohibited Activities" include a range of activities and contractual provisions that the SEC has deemed to be “contrary to the public interest” and would include, for example, a prohibition against any clawback of overpaid carried interest being limited to the net after-tax amount; and a prohibition on indemnification by the fund or its investors for the adviser's negligence. These and other proposed changes would, if implemented, force a change to market practices in both European and US private funds and would require changes to existing (negotiated) contracts. And, while many of the other changes outlined in the SEC's proposals will only affect investment advisers that are registered with the SEC (and not ERAs), those changes would also add significant additional reporting, disclosure and compliance requirements for those firms. One change – though not one applicable to ERAs – that has caught the attention of the secondaries community is the proposed requirement for a "fairness opinion" on a GP-led secondary transaction. The SEC claims that this is "an important check against an adviser’s conflicts of interest in structuring and leading a transaction from which it may stand to profit at the expense of private fund investors". In fact, of course, fairness opinions are fairly standard in the US (and European) market as a way to manage the unavoidable conflicts of interest that arise on a secondary deal that is initiated by the private equity fund sponsor, including when the manager wants to offer investors an opportunity to continue to hold one or more assets while giving others the chance to achieve liquidity. The fund's LPAC...
Last week, Carlyle pledged net zero greenhouse gas (GHG) emissions across its investment portfolio by 2050, and committed to significant progress by 2025. The goal itself is important, of course, but the way it will be achieved is perhaps even more newsworthy. As for other private equity firms who have set GHG reduction targets, the commitment is not founded on asset allocation or divestment – an approach whose effectiveness is questioned by academics. As emphasised in Carlyle's announcement, the firm will use the significant influence that it has over the companies in its portfolio to help transition their businesses to a pathway that is consistent with the goals of the Paris Agreement. This focus on transitioning business through the super-charged engagement that comes with private equity ownership matters. As the Chief Executive of the European industry association, Invest Europe, said recently, the unique features of the private equity and venture capital business model mean that the asset class has a real chance to deliver positive change. That applies to changes that further social and environmental goals just as must as it does to changes that improve financial performance – although, of course, those objectives are increasingly inseparable. Not only is it becoming clear that more capital will flow to asset managers that can contribute to the "just transition", it is also widely recognised that (material) sustainability issues will have a direct impact on risk and on exit value and, therefore, on fund returns. But the challenges in grasping this opportunity should not be under-estimated. Conscious of reputational and regulatory concerns – and indeed ethical issues – firms are understandably reluctant to sign up to commitments they are not confident they can achieve. Decarbonisation, at least in some sectors and regions, is very challenging, while commitments to invest in climate solutions rely on investible projects being available. Many private equity and venture capital firms are relatively small and need to invest significantly in the expertise required, both at manager and portfolio company-level. Such investment is certainly in evidence in private markets – and so is guidance that is specifically addressed to private equity. Invest Europe's Climate Change Guide and the private equity specific guidance issued by the SBTi are two prominent examples. Last week saw publication of a consultation draft of another very helpful resource: the IIGCC Net Zero Investment Framework's Private Equity module. The IIGCC – the Institutional Investors Group on Climate Change – combines over 370 asset owners and asset managers, together speaking for around €50 trillion. The Group launched their Net Zero Investment Framework in March last year, but did not cover private equity. A working group has now addressed that gap, and the draft module is intended to complement the main Investment Framework, giving general partners and limited partners a clear path to committing to Net Zero across the portfolio. The consultation is open until 27 February and the industry may want to weigh in on some of the detail. The IIGCC Private Equity guidance covers private equity and growth capital, with some recommendations also addressed to venture capital firms. The guidance is designed to be used by investors and by primary funds, but also by funds of funds and secondaries funds – who may find it more difficult to pull the levers needed to fully comply. Ideally, all portfolio companies would be in scope of the recommendations but, where that is not practicable, firms may scope out certain portfolio companies where the investor does not have "meaningful" influence over the company, where the company does not operate in a "high impact" sector and so long as at least 70% of net asset value or emissions is covered. The latter coverage requirement rises to at least 90% of total portfolio emissions by 2030. Using criteria laid
Private equity had a bumper year last year. Although official data will not be available for a few months, there are already reports that 2021 was a record year for fundraising, investments and exits. That – together with data (and anecdotes) that continue to suggest that private markets are generating outsized returns – means that there are both more opportunities for asset allocators to access the asset class, and more incentives for them to do so. Reports that large institutional investors are increasing allocations to the asset class will no doubt inspire others. Participants in the private markets have always been quick to innovate and – since there is little in the world of finance that starts with a blank sheet of paper – that often means taking well-established concepts and repurposing them. For LPs who are seeking to ramp up their private markets exposure quickly, or who want some early liquidity without forgoing the future upside in their private equity portfolio – or simply want to raise further capital to meet a large "uncalled" commitment – accessing the mature funds finance market can be an attractive option. For some, it can be an appealing alternative to a secondary sale of a portfolio of fund interests. The structure is simple, and already familiar to (among others) managers of funds of funds and secondaries funds: move fund interests to a new vehicle and use them as collateral for a loan. The package of LP positions might be a relatively small bundle of interests in similar funds, or a large, well-diversified portfolio. There are a number of lenders keen to provide capital into this market, because it provides them with private markets exposure at a lower cost of capital and with enhanced down-side protection. These lenders are eager to educate larger fund investors, spanning institutions and family offices, on the availability of these products, which offer relatively cheap, often limited recourse, liquidity on the basis of fairly conservative loan-to-value ratios. Several recent deals have underlined the attractions for LPs with existing exposure to the asset class. Although these transactions seem superficially straightforward, negotiations will focus on some key terms that differ considerably from portfolio-to-portfolio and provider-to-provider. These terms can have important commercial consequences for the borrowing LP and, potentially, the GPs of the underlying funds. For example, what should happen to distributions received from the underlying funds during the life of the loan facility? To what extent should they be automatically applied to pay down the outstanding borrowings, both in performing and non-performing scenarios? Operationally, to what extent does the LP require such amounts to remain available to fund future capital calls into the secured portfolio or, indeed, to acquire new positions? In what circumstances can distributions be paid out to the investor for use elsewhere, provided that the required loan-to-value thresholds are met? Lenders will clearly want to undertake legal and commercial due diligence on the portfolio interests, and similar considerations will arise to those that apply on a secondary sale in relation to sharing confidential information about the underlying funds with a third party. Lenders will generally want to review the limited partnership agreements and subscription documents and to build eligibility and concentration criteria for continued funding against each position and further borrowing against newly acquired interests. One important transaction dynamic that needs to be addressed at the outset is the extent to which the underlying fund GPs need to be involved. Often there will need to be a consent, or at least practical cooperation, in order to transfer the LP interests into a special purpose vehicle (an "SPV"), owned or managed by the existing LP and, perhaps, to the LP granting security over the shares in the SPV. But some of the (usually more...
Last year, many alternative asset managers worked harder than ever to ensure that their investment approach was equipped to meet one of the defining challenges of our time. Sustainability – although not a new theme for most firms – was close to the top of the agenda. While legal and compliance teams struggled to keep up with new and emerging sustainability regulation, senior-decision makers re-focused on the opportunity. Increasing investor demand for investment funds that are part of the solution to societal problems – and a growing aversion to those that do not actively avoid harm – requires a strategic response. But the active ownership model that is an integral part of private capital's heritage means alternative asset managers are very well-placed to respond.
For many private fund managers – especially a new firm, a spin out from a larger business, or a firm that manages a relatively small pool of capital – the UK regulatory requirements can be daunting. Getting the necessary regulatory permissions is an expensive and time-consuming business, especially if there is no certainty that the fundraise will be successful, or if the fee structure leaves little headroom for advisory costs or compliance staff. The barriers to entry may even be so high that they stifle competition and innovation. In this scenario, many firms turn to regulatory hosting services. These are well-established and enable a fund sponsor to enlist a regulated service provider to provide licensing cover for the firm's activities, together with compliance support and oversight. These arrangements are often temporary – to allow a sponsor time to establish its own regulated entity – but can be permanent, especially for smaller fund sponsors.
A regular audio briefing for the alternative asset management industry. In the event, of course, the third country passport wasn't activated in 2015, and still hasn't been – perhaps in part because the UK voted to leave the EU in 2016, and UK-regulated firms could have used the passport to gain access to the single market. Meanwhile, the AIFMD review was duly launched in 2017, when KPMG was commissioned to prepare a https://ec.europa.eu/info/sites/default/files/business_economy_euro/banking_and_finance/documents/190110-aifmd-operation-report_en.pdf?domain=sites-traverssmith.vuturevx.com (report), but it was only last week that https://www.traverssmith.com/knowledge/knowledge-container/commission-proposes-evolution-but-not-revolution-for-eu-funds-regimes/ (concrete reform proposals) were issued by the Commission. Both the slow pace of the review and the limited scope of the proposals that have been put forward reflect the Commission's view that the current regime is broadly working well. There has also not been much pressure from industry participants and other stakeholders for dramatic change. There is still some way to go before any changes become effective, and the European Parliament and Council may yet demand more radical reforms. But, even if only the Commission's current proposals survive, there could be important implications for EU and international firms over time – especially those with structures that rely on delegation. It was widely expected that the Commission would have something to say on delegation, since many EU-headquartered asset management firms (along with many based in the UK, US and elsewhere) rely on structures in which an EU-regulated fund manager delegates important functions – usually "portfolio management" – to a firm in another financial centre, which may be inside the EU or in a third country. The delegation model is a well-established feature of EU asset management and allows functions to be carried out more efficiently. The AIFMD itself already includes demanding rules on delegation, including a requirement that the EU-regulated principal manager must have the resources and expertise to effectively supervise the delegate, and that it retains enough functions so that it does not become a mere "letter-box". As anticipated, however, the Commission's proposals signal a continuing concern that delegation may be over-used. The proposals therefore include a requirement for EU regulators to probe delegation arrangements more thoroughly and to report substantial delegation arrangements to the supervisor, ESMA, on an annual basis, with ESMA reporting to EU institutions every two years on developing market practice. If adopted, the proposed amendments to the AIFMD would also require ESMA to conduct two-yearly peer reviews of measures taken by national regulators to prevent firms becoming "letter-box" entities. That would inevitably increase the (already significant) focus on delegation by national regulators, especially in Luxembourg and Ireland. Moreover, the Commission will review the effectiveness of the AIFMD delegation regime after five years, so it is possible that further changes may be made in future. Other notable provisions in the draft include a requirement to report more extensive information on fees and charges to fund investors on a quarterly basis. This would include all fees and charges directly or indirectly charged or allocated to the fund, or to any of its investments. While many firms will already provide such information to investors in various forms, they would have to compare their current practice to these new, more prescriptive, regulatory requirements. It also seems highly likely that the revised AIFMD will restrict access to firms under national private placement regimes if they – or the funds they manage – are from a country on an EU list of non-cooperative tax jurisdictions. Although that would not currently be a major issue, some...
Glasgow's climate summit was both an important step forward and a missed opportunity to go further. One important step forward was undoubtedly COP 26's unprecedented focus on the role of finance in tackling the climate emergency, which catalysed huge commitments from the private sector. The Glasgow Financial Alliance for Net Zero (https://www.gfanzero.com/ (GFANZ)) now speaks for over USD130 trillion of capital that is committed to transforming the economy. 450 firms from 45 countries – including https://www.netzeroassetmanagers.org/ (several leading alternative asset managers) – are signed up to help deliver the estimated USD100 trillion of finance needed for net zero over the next three decades. Glasgow's focus on finance was strategic: enlisting the support of the private sector is seen as critical if governmental pledges are to be achieved. And while voluntary action is applauded, regulators, especially in Europe, are determined to use their rulebooks to ensure the asset management community is playing its part. In the EU, the first wave of asset manager regulation is already in force or in active development – and is not without its challenges. But it is only in recent months that the sustainability disclosure rules that will apply to UK-regulated alternative asset managers have started to emerge. Some asset managers would argue that the benefits of harmonisation across Europe outweigh the opportunities created by divergence, but the British government only partially agrees. The EU Green Taxonomy, for example, has been endorsed and, with some adjustment, will be used by UK firms. But in other areas, UK regulators do not feel beholden to EU approaches. There is a recognition that the EU rules have not entirely hit their mark – at least not yet – and there is a willingness to learn lessons. Indeed, the UK has a close eye on emerging international standards and is tending to prefer those. The adoption of mandatory climate-related reporting for companies, asset owners and asset managers is a case in point – the UK has opted for a https://assets.bbhub.io/company/sites/60/2020/10/FINAL-2017-TCFD-Report-11052018.pdf (reporting framework created by the Task Force on Climate-Related Financial Disclosures) (TCFD), a body established in 2015 by the Financial Stability Board, whose recommendations have gathered endorsements from organisations across the world. This reporting framework is designed to provide decision-useful, forward-looking information on how financial risks and opportunities are being addressed by companies and other organisations. Reports have to cover the strategy and governance of climate-related business issues, as well as quantitative disclosure of specific metrics and targets. UK-regulated alternative asset managers with over £5 billion under management (and various other financial market participants) need to get ready to publish these reports in the coming years. For some firms that will be a significant additional level of public reporting, even though many recognise the benefits and are, in fact, already actively engaged – https://www.bvca.co.uk/Portals/0/Documents/Research/2021%20Reports/BVCA%2010%20Steps%20to%20Net%20Zero%20-%20Private%20Capital%20In%20Action%202021.pdf (as this week's BVCA report demonstrates). (See our detailed briefing on TCFD reporting requirements for asset managers.) And this month the UK's regulator unveiled tentative proposals for a disclosure regime that will extend beyond climate-related issues, to include other "sustainability risks, opportunities and impacts". These "https://www.fca.org.uk/publication/discussion/dp21-4.pdf (Sustainability Disclosure Requirements)" (SDR) will use the TCFD framework (with its four core themes) and are intended to apply both at firm-wide and at product (or fund) level. Two distinct layers of disclosure are envisaged; the first, with basic information aimed at...
Last week's Autumn Budget confirmed the UK government's determination to use regulatory change as a key driver of economic growth and recovery. This ambition – which includes important changes to existing rules, as well as entirely new ones – has been evident for some time now. In part linked to Brexit, the government believes there is an opportunity for tax and legal rule-changes to help deliver important policy goals, and has been working hard to draft legislation and regulations that will support that effort. Many of these changes were confirmed in last week's budget, and there were also a few concrete new announcements – but the rules themselves are still mostly in development stage and did not grab the headlines. Instead, the media's focus was on some significant new spending commitments, and the equally eye-catching https://www.traverssmith.com/knowledge/knowledge-container/budget-2021/ (corporate) and https://www.traverssmith.com/knowledge/knowledge-container/health-and-social-care-levy/ (personal) tax increases that were announced earlier in the year. But several impending regulatory changes will create risks and opportunities for the alternative asset management sector – and will continue to require active engagement with policymakers as the detailed rules are developed. We already know that there will be sweeping changes to sustainable finance rules – necessary if the government is to achieve its ambition for London to become the https://www.gov.uk/government/news/chancellor-uk-will-be-the-worlds-first-net-zero-financial-centre (world's first "net zero aligned financial centre"). Among the many recent announcements were https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1029354/tcfd-consultation-government-response.pdf (finalisation of the rules for climate-related reporting by large UK private companies), https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-sustainability-insights-the-uks-green-taxonomy/ (further announcements on a Sustainability Disclosure Regime and Green Taxonomy), swiftly followed by https://www.fca.org.uk/publications/discussion-papers/dp21-4-sustainability-disclosure-requirements-investment-labels (more concrete proposals) on the disclosure and labelling regime for asset managers. These will bring strategic opportunities as well as compliance challenges. But the government's competitiveness agenda extends much further than green finance. For example, the ongoing https://www.traverssmith.com/knowledge/knowledge-container/budget-2020-review-of-uks-funds-regime/ (review of the UK funds regime) is progressing and will soon lead to concrete changes. One important aspect of this drive to make the UK a more attractive place to locate a fund is the proposed new regime for https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-alternative-insights-the-uks-new-holding-company-regime/ (asset holding companies). The government's proposals have already been the subject of two consultations, and https://publications.parliament.uk/pa/bills/cbill/58-02/0184/210184.pdf (draft legislation) was published yesterday (4 November). This is welcome, and the suite of tax benefits available to qualifying asset holding companies will be generous. In a related attempt to make it easier for firms to locate in Britain, the Chancellor also https://www.traverssmith.com/knowledge/knowledge-container/autumn-budget-2021/#budgetresources_5 (unveiled proposals in the Budget) that would help firms to move all or part of their structure to the UK: new rules will allow non-UK incorporated companies to re-domicile to the UK, while maintaining their legal identity – something that is not currently possible under UK law. Among other things, these new rules may help firms who want to move holding companies to the UK. Other aspects of the review of the UK funds regime