IHS Markit
IHS Markit is a world leader in critical information, analytics and expertise to forge solutions for the major industries and markets that drive economies worldwide.
ID: 28748136794-46
Lobbying Activity
Response to Supervisory data strategy
15 Jun 2021
We agree with the EC’s conclusions that inefficiencies in the EU reporting process are generating significant costs and burdens as well as lowering quality for supervisors. EU (and global) reporting requirements are complicated and can be duplicative and inconsistent. This has led to firms needing to collect huge amounts of data and reporting multiple times in multiple formats. This is inefficient for reporting firms, regulators and market participants (in respect of transparency).
While we agree with the EC’s proposed approach and the 5 main areas for improvement, we believe that there should be 3 overriding principles guiding the EC: 1) define once and report once (as the ultimate aim); 2) coherence (between EU regulations and initiatives as well as international initiatives); and 3) data quality.
1) Define Once, Report Once
The overall aim should be to reduce the amount of data required by only requiring reporting of fields that serve a useful purpose. Reporting less data, fewer times would allow better focus – something that will ultimately lead to better quality data. Consequently, we strongly support the approach set out recently by the EBA of ‘define once, report once’ and believe that the EC should be aiming for this for all EU reporting.
A ‘define once, report once’ approach should mean that firms report once wherever possible and regulators can consume the data they need to meet their mandates. Ideally this one-time reporting should also encompass transparency requirements (e.g. under MIFID/MIFIR), with a relevant subset of the once reported data being made public – rather than there being separate infrastructure and regimes as now.
2) Coherence
Currently there are a number of initiatives on data reporting within the EU and also more internationally. The EBA has recently consulted on data reporting, the Bank of England is running a similar exercise and a review of MIFID transparency is expected. The EC should prioritise coherence as without it further fragmentation and poor quality data for policymakers is likely. We would urge the EC to take the lead globally in harmonising and standardising reporting requirements, reducing regulatory fragmentation and avoiding arbitrage. Further, regulators should consider whether some data could be collected by themselves without involving the regulated firms (for example, by drawing data directly from approved persons registers, annual reports or bodies such as GLEIF). This process could be automated to reduce burden on regulators.
3) Data Quality
Data requirements need to be clear, consistent and practical. If regulators required data that was aligned to the data firms produce (or should produce) as part of their business, data quality and compliance would improve. It should also help firms run more efficiently (for example, accurate data can help with the management of risk, capital allocation and market abuse) and reduce the marginal costs of reporting. Regulators should also consider whether requirements represent barriers to competition or innovation and act accordingly if they do.
Finally, the EC should engage beyond financial firms. Data providers are usually specialists who play a key role in improving efficiency, resilience and reduce fragmentation in the market. Such providers can build to the highest technological standards and mutualise the cost among many clients. This can help reduce the overall costs for the industry, reduce the impact of fragmentation, ease the costs of market entry (aiding competition) and help regulators by providing more consistent data. Such specialist providers have cross-market experience and, therefore, can better understand the strengths and weakness of the data across the whole market. Working with such providers will, therefore, help the EC build a better understanding of the trends and challenges in reporting as well as appreciate how technology and innovation could improve reporting capability in the future.
Read full responseMeeting with Rozalina Petrova (Cabinet of Commissioner Virginijus Sinkevičius)
8 Mar 2021 · Implementation of EU Circular Economy Action Plan and plastics recycling
Meeting with Helena Braun (Cabinet of Executive Vice-President Frans Timmermans)
8 Mar 2021 · Implementation of EU Circular Economy Action Plan and plastics recycling
Response to EU Standard for Green Bond
7 Aug 2020
We agree with the EC that green bonds play an increasingly important role in asset finance and we expect that this trend will continue and increase in importance for fixed income investors. Recognising this increasing importance and the role data will play, firms such as IHS Markit are currently engaged in research and development activities around what bond level Green/ESG content could look like. As investment and innovation in data products continues, information and transparency around green bonds should develop and become more accessible and robust in meeting the requirements of investors and policymakers alike.
We broadly agree with issues that the paper identifies as the main barriers to the growth of the green bond market (namely: lack of agreement on the definition of green; complex review procedures; and a lack of investible assets). The EC is also correct that issuing a green bond is typically more costly.
We consider that more specific disclosure on green bonds would be a positive development for this market. Consistency around the way data is reported and structured would improve the comparability of information and help fight greenwashing. However, this process should be principles based and driven by markets rather than regulation, which is likely to diminish innovation and slow the developing marketplace. Robust accreditation would ensure a higher level of reliability in which end users of the information could have confidence that certain requirements were met or exceeded.
We believe the EC should ensure any action it does take is proportionate and does not dampen innovation, increase costs for market participants and raise barriers to market entry. Part of this process should be to ensure any standards introduced around green bonds incorporate and are consistent with industry standards (such as the ICMA Green Bond Principles) and existing or incoming regulation (such as the EU taxonomy, Sustainable Finance Disclosure Regulation or ESG disclosures for benchmarks). Duplication and forcing market participants to comply with multiple standards and regulations must be avoided. There have already been a number of regulatory initiatives and these have only recently been introduced. They should be given time to deliver on their policy objectives, rather than continuously adjusted. Increased costs, restrictions and compliance burden will not make green bonds more attractive and will reduce the investible assets in EU markets.
It is important that any action the EU takes should support the development of a transparent, accessible and vibrant market in ESG data. Care should be taken to avoid unrealistic expectations about the capability of regulation imposing non-market standards to deliver usable data. We would be concerned about attempts to build an alternative scheme that differed from current market-based, standards (as the paper suggests) for the reasons set out above. This could pose a serious risk to the development of data products that will provide investors with greater transparency and the ability to compare investment products. The EU should also avoid attempting to regulate the market for third-party service providers on sustainability data, ratings and research. Instead, standards should be flexible enough to ensure innovation and efficiency and avoid a tick box approach.
Read full responseResponse to Key elements of the methodology reflecting environmental, social or governance (‘ESG’) factors
6 May 2020
IHS Markit supports the provision of additional transparency in relation to ESG factors, comparability between benchmarks in this respect, and encouraging the provision of ESG benchmarks. However, we would like to make the EC aware of some points it should consider before adopting the final legislation.
To comply with these regulations, BMAs will typically rely on third party data providers. It would not be practical for BMAs to develop such factors or source the underlying data themselves. This would require significant additional resources and also result in a lack of comparability between BMAs. Therefore, effective and proportionate compliance that fulfils regulatory objectives will depend on the required ESG disclosure factors being made available by vendors. Overly prescriptive or inflexible disclosure requirements could mean that the cost of acquiring data and implementing the framework would surpass the revenue from ESG indices and so discourage provision. This would be precisely the opposite of the policy intent.
IHS Markit has been considering how to comply with ESG disclosure requirements for some time and we have concerns that, as currently drafted, the proposed draft DAs present specific challenges:
1. Some aspects are overly prescriptive and either cannot currently be complied with or would create significant additional costs (without corresponding benefits);
2. They do not reflect the nature of some benchmarks that are in scope for disclosure requirements but where ESG screening is performed externally by the client of the BMA or an alternative third party; and
3. A requirement to specifically disclose in every methodology document even when the methodology is not driven by ESG factors is not proportionate.
We would, therefore, encourage the EC to consider consider the proportionality of specifically requiring a disclosure in every methodology document, even when that methodology is not driven by ESG factors, is not proportionate. It would require BMAs to update hundreds of methodology documents for no added value as the information would be contained in the relevant benchmark statement. We recommend the EC amend the draft DAs to require methodology documents only to be updated where the methodology reflects ESG factors.
We would also like to highlight that, as Article 13 of the Benchmark Regulation does not apply to Annex II, the disclosure requirements would not apply to these commodity benchmarks.
Further details are provided in the attached letter, which also covers Benchmark Statements.
Read full responseResponse to References to ESG factors enabling market participants to make well-informed choices
6 May 2020
IHS Markit supports the provision of additional transparency in relation to ESG factors, comparability between benchmarks in this respect, and encouraging the provision of ESG benchmarks. However, we would like to make the EC aware of some points it should consider before adopting the final legislation.
To comply with these regulations, BMAs will typically rely on third party data providers. It would not be practical for BMAs to develop such factors or source the underlying data themselves. This would require significant additional resources and also result in a lack of comparability between BMAs. Therefore, effective and proportionate compliance that fulfils regulatory objectives will depend on the required ESG disclosure factors being made available by vendors. Overly prescriptive or inflexible disclosure requirements could mean that the cost of acquiring data and implementing the framework would surpass the revenue from ESG indices and so discourage provision. This would be precisely the opposite of the policy intent.
IHS Markit has been considering how to comply with ESG disclosure requirements for some time and we have concerns that, as currently drafted, the proposed draft DAs present specific challenges:
1. Some aspects are overly prescriptive and either cannot currently be complied with or would create significant additional costs (without corresponding benefits);
2. They do not reflect the nature of some benchmarks that are in scope for disclosure requirements but where ESG screening is performed externally by the client of the BMA or an alternative third party; and
3. A requirement to specifically disclose in every methodology document even when the methodology is not driven by ESG factors is not proportionate.
We would, therefore, encourage the EC to consider addressing the following points:
- Remove or provide flexibility in the DAs for standards that are overly prescriptive and not covered by ESG factor providers. We have identified three main areas where we believe the proposed standards will cause particular problems:
1) NACE classifications;
2) Green CapEx and GHG Intensity; and
3) Human Rights, Social Violations and Physical Risks
- Provide flexibility so that BMAs are not be required to make disclosures as part of the BM statement when acting on exclusion or inclusion lists from clients. In such a scenario, the BMA should only be required to provide an explanation of the exclusion criteria.
Further details are provided in the attached letter.
Read full responseResponse to Review of the Benchmark Regulation
15 Apr 2020
IHS Markit is a leading benchmark administrator. IHS Markit Benchmark Administration Ltd. (IMBA UK) has been FCA authorised since July 2017, and Markit N.V. (IMBA EU) received AFM authorisation in December 2019. These administrators provide more than 29,000 benchmarks across financial, economic and commodity underlyings, including proprietary benchmarks and benchmarks administered for clients.
IHS Markit appreciates the opportunity to provide its comments regarding the European Commission (EC) Inception Impact Assessment (IA) on the review of the Benchmark Regulation (BMR). Benchmarks are a crucial contributor to the functioning of EU economy and financial markets, particularly as they are increasingly used to provide EU investors with lower cost, diverse investment strategies. EU regulation has an important role to play in supporting the development of a robust market, which will ultimately lead to increased engagement in capital markets in the EU and beyond.
IHS Markit welcomes the review of BMR, which provides an excellent opportunity to consider the operation of the regulation and make the necessary improvements to help it deliver on its objectives of ensuring the accuracy and integrity of indices used in benchmarks, contribute to the proper functioning of the internal market and achieve a high level of consumer and investor protection. We believe that BMR has already made a positive contribution to these objectives. There are already more than 60 regulated administrators in the EU who have made significant investments in improving the robustness of the benchmark industry.
We would recommend that the review clarify the scope of the regulation and remove uncertainties such as the status of indices used in OTC financial instruments and self-indexing. The review also provides an opportunity to properly focus the BMR away from considering risk solely as a function of notional size and broaden it to a number of specific factors that could lead to manipulation and investor detriment. We believe the key risk factors in benchmark production are around the use of discretion, transparency around methodologies and, importantly, conflicts of interest.
The review also provides an opportunity to improve the functioning of the BMR’s third country regime. Differing global regimes should not be used as an excuse for rolling back the scope of the EU’s regulation, weakening protections for EU investors or causing an unlevel playing field between EU and non-EU administrators (which would also encourage regulatory arbitrage). Instead an improved package of measures should include a broader exemption from BMR for third country benchmarks provided by public authorities for public policy purposes. These providers have few commercial incentives to partner with an EU administrator or legal representative (through endorsement or recognition respectively) but play an important role in facilitating investment and hedging risk. This exemption should include third country FX rates, as suggested in the EC’s consultation paper in 2019, and also other relevant interest rate and public policy rates. The EC could also consider a temporary de minimis exemption for third country benchmarks to overcome potential friction around EU users adopting new third country benchmarks.
In the attached letter we outline our views on the European Commission Inception Impact Assessment, particularly around 'Efficiency and Proportionality', 'Transition from panel-based critical interest rate benchmarks to risk-free rates published by central banks' and 'Ensuring a level playing field / international perspectives'.
We hope these comments and attached letter is useful for the European Commission. Please do not hesitate to contact us if you have any questions or would like to discuss further.
Read full responseMeeting with Ditte Juul-Joergensen (Director-General Energy)
17 Jan 2020 · Green Deal/Possibility of participation in teh CERA Week
Meeting with Kyriacos Charalambous (Cabinet of Vice-President Johannes Hahn)
17 Oct 2017 · Political and economic developments and investment climate in Western Balkans.