Lawtech showcase: ESG Ready, Ashurst Advance Digital
Ashurst Advance Digital explains ESG Ready, its cloud-based regulatory product that allows financial services and other in-scope firms to prepare and manage their compliance with the incoming EU Sustainable Finance Disclosure Regulation.
What is ESG Ready and who is it for?
ESG Ready is a cloud-based regulatory change solution that assists financial services and other in-scope firms to prepare for and manage their compliance with the new EU Sustainable Finance Disclosure Regulation (SFDR), which applies from 10 March 2021.
How does it work? What are the key features?
ESG Ready comprises two high-level aspects.
1. Legal assessment and advice
We have distilled the legal analysis under the SFDR in a manner that allows clients, by providing a handful of inputs, to automatically determine an in-scope entity's treatment or 'categorisation' under the SFDR and the relevant obligations that apply to it, and the practical steps each entity needs to take, based on that categorisation.
The obligations and steps are output in a dynamic "tracker" format, allowing you to view the obligations on a per-entity basis and in a format that is filterable and searchable. We also offer an in-app regulatory updating service, through which we provide automatic notification and updating of obligation trackers to reflect new and revised guidance on the application and interpretation of the SFDR.
2. Regulatory change management
Once you’ve completed your assessment and the obligations tracker is generated, you can use the in-built project management and data visualisation functions to manage the process and progress towards compliance, and report back to your firm. This functionality includes the ability to assign responsibilities and tasks, follow progress to completion and access dashboards for a one-click status view. If you prefer to use your own management or reporting tools, the data within the product can be exported in a range of formats.
What are the main benefits for clients?
ESG Ready enables you to identify what steps are required to be compliant with the SFDR, and then manage all aspects of that compliance within the product itself. It is designed to be simple, cost-effective and a one-stop shop. Importantly, you can rely on the assessment and obligations outputs as legal advice.
Could you give us an example of how ESG Ready works in practice, and how it could solve a practical or legal question?
For every regulatory change process, there are broadly four key steps.
- Defining what is changing and the impact on your business
- Preparing a plan for implementing the changes and managing any impacts
- Implementing that plan
- Monitoring adoption of the changes and the impacts for reporting, updating and maintenance purposes
ESG Ready automates steps 1, 2 and 4 and allows you to complete step 3 with the support of our legal experts, either alone or in collaboration with your in-house and/or external environmental, social and governance (ESG) advisers.
For example, a fund manager based in continental Europe who markets impact-focused and non-impact-focused funds throughout the EU will need to comply with the SFDR as from 10 March 2021. Depending on certain characteristics of the manager and the funds it manages, it could be required to make any number of disclosures as part of its regular operations.
With ESG Ready, the manager can obtain not only a tailored list of absolute disclosure obligations under the SFDR, but also the preparatory steps and decisions to be taken before that disclosure can be made in the required manner. Where the disclosure has been templatised, those templates are linked to for customisation.
Using this information, which is generated automatically and within minutes, the manager can then set out to address each of the relevant obligations with the help of our Ashurst regulatory experts.
With the SFDR's level 2 guidance (detailing how the disclosures are to be made) yet to be finalised, and expected to be published over the next two years, it is essential that a monitoring programme is in place. Rather than assign this monitoring task to an individual, you will receive automatic notifications when draft and final guidance is published, and your in-product tracker will be dynamically and automatically updated to reflect such guidance.
Thus, you can easily see what has changed and take the appropriate steps to ensure you remain in compliance.
What feedback have you had from clients?
We've had significant interest from clients, particularly European and US fund and asset managers. Overall, the feedback has been very positive. The SFDR is clearly an area of regulatory change that is front-of-mind for clients.
What does the setup and implementation process look like?
ESG Ready is a cloud-based product, so the client onboarding process is fairly straightforward. Each client will have access to their own secure ESG Ready site tailored to their subscription package. We provide an onboarding training session for the client users, offer access to a product support email and make supporting materials available in-product.
Is it easy to use?
Yes! The product is very intuitive, though feature-rich. In addition to the onboarding training, there are guidance notes provided in the assessment questionnaire, and a helpful user guide.
How is ESG Ready priced?
Pricing is on a fixed-fee subscription basis for the term of the product, which is through to the end of December 2022, the point at which all further guidance should have been published and clients should be in full compliance with the SFDR.
Are free trials and/or demonstrations available?
Clients can request a demo by emailing ESGReady@ashurst.com.
The team's approach
What prompted you to build this solution?
ESG Ready is the brainchild of Lorraine Johnston, a counsel in our financial regulatory practice and one of our lead lawyers focusing on sustainable finance. Given how topical and strategically important ESG is for us as a firm, as well as the fact that this was a greenfield area of law, it was a no-brainer for Ashurst Advance Digital to collaborate with her.
Did you collaborate with any external technology companies in the creation of ESG Ready?
ESG Ready is underpinned by a combination of BRYTER, HighQ, and bespoke development work undertaken by our in-house team.
Ensuring the seamless integration of these three elements required various discussions with the third-party vendors, particularly as part of our information security workstream. BRYTER is new to our tech stack and they provided fantastic support as we needed to quickly upskill on how to harness its capability.
One of the core product team members was formerly of HighQ and so we were able to significantly leverage his expert knowledge to build out some extremely complex HighQ-powered functionality for the product.
What challenges did you encounter in building technology internally? Can you share any key lessons and takeaways?
I think the first and biggest lesson has been the recognition of how many teams and people within the firm needed to play a part in bringing a digital product to market and, therefore, how complex and difficult that challenge actually is.
Secondly, we had to face the challenge of systematising our lawyers' knowledge such that it's capable of being rendered digitally. It takes an incredible amount of foresight to ensure that the technological framework has enough room for manoeuvre to deal with the complexities and ambiguity of a regulatory change process.
It is also noteworthy that 100% of the technical build and work leading up to the launch was done whilst the team worked remotely from one another. There were definitely many times that we wished we could have convened around a whiteboard. However, we certainly proved that productivity and creativity are not location dependent!
If you had to summarise as a tweet – what would be your predictions for legal technology over the next 12 months?
Legal industry reaping the benefits of technology through cross-industry collaboration delivering law-to-law, law-to-business and law-to-consumer innovations.