ESG: European Regulators Confirm Approach to SFDR Compliance from 10 March 2021

The European Supervisory Authorities (ESAs) have published a Supervisory Statement to clarify the application of the Sustainable Finance Disclosure Regulation (SFDR)¹ in anticipation of the requirements applying in the European Economic Area (EEA) from 10 March 2021. The Supervisory Statement does not impose new requirements on financial market participants and advisers, but confirms the industry approach to using the draft Regulatory Technical Standards (RTS) as a reference point in their compliance efforts for the 10 March 2021 deadline.

The RTS implement the more detailed requirements of the SFDR through secondary rules, which, due to the disruption caused by COVID-19, will not be finalised by 10 March 2021, as originally intended.² The ESAs have proposed applying the RTS from 1 January 2022.

See Annex 1 of this client alert for an adapted version of the table published by the ESAs with the relevant application dates under the SFDR and the Taxonomy Regulation.

The ESAs have stated that the draft RTS should be used as a reference point for the following SFDR requirements:

• Disclosure of information on compliance with the “do no significant harm” principle for funds or portfolios that make sustainable investments.³
  
  
• Investment manager-level disclosures on the adverse sustainability impacts of investment decisions.⁴
  
  
• Investment manager-level website disclosures in relation to each fund or portfolio that either promotes environmental or social characteristics, or makes sustainable investments.⁵
  
  
• Product-level precontractual disclosures for funds or portfolios that promote environmental or social characteristics⁶, or makes sustainable investments.⁷

Approach to first-time periodic reporting for Articles 8 and 9 funds or portfolios

The ESAs have also proposed a change to the commencement date of first-time periodic reporting by Article 8 and 9 funds or portfolios should the draft RTS not be adopted in time to give financial market participants at least six months to prepare for compliance with the periodic reporting requirements of Chapter V of the RTS.

The proposed change would apply the RTS to the periodic reports published in or after 2022 in relation to reference periods starting from 1 January 2022, while the periodic reports published in 2022 in relation to reference periods starting before 1 January 2022 would apply the high level and principle-based-requirements of Article 11(1) of the SFDR.

Contact Information

For further information or advice, please contact one of the partners named below or your usual contact at Akin Gump.

The contribution of Andrea Gonzaga is gratefully acknowledged.

¹ Joint ESA Supervisory Statement on the application of the Sustainable Finance Disclosure Regulation, 25 February 2021 (here).

² For more information see: ESG: New Disclosure Rules for Investment Managers, Akin Gump Financial Regulatory Alert, 25 November 2020 (See here); and SFDR – Revised Secondary ESG Disclosure Measures, Akin Gump Financial Regulatory Alert, 11 February 2021 (See here).

³ Article 2a SFDR.

⁴ Article 4 SFDR.

⁵ Article 10 SFDR.

⁶ Article 8 SFDR.

⁷Article 9 SFDR.