The ESAs (the three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs)) have updated their joint supervisory statement on the application of the Sustainable Finance Disclosure Regulation (SFDR) on Friday, March 25th, 2022
Three main points covered in the statement are:
- SFDR Expected Timeline overview
- Expectations about product disclosures under Article 5 and 6 of the Taxonomy Regulation
- Use of estimates
Please find below a short summary of the main points:
Timeline Overview & clarifications
- The Application Date of the SFDR Level 2 Regulation (covering the SFDR RTS from Oct. 2022) is expected to remain January 1st, 2023.
- Entity-related PASI Statement (Art 4, SFDR)
A high level explanatory PASI Statement shall be disclosed already starting from June 30th, 2021.
The first Entity-related PASI Statement based on the template in the RTS from Feb. 2022 is expected to be published by the FMP by June 30th, 2023 with a reference period corresponding to the calendar year of 2022.
- Periodic Product Disclosures (Art 11, SFDR)
FMPs must start providing SFDR periodic disclosures based on Article 11(2) of the SFDR for the interim period Jan. 1st – Dec. 31st, 2022. In this time frame FMPs can use the RTS templates as a reference.
Periodic disclosures based on the SFDR RTS including the taxonomy related product disclosures are expected to be applied from 1 January 2023 (with first reporting period i.e. January 1st 2023 – March 31st 2023).
- Draft RTS
The Draft RTS from October 22nd, 2022 are not final yet and must still be adopted by the European Commission. After the commission’s adoption the European Parliament or the Council have the right to object to the draft RTS within a period of three months from the date of notification of the adoption of the Commission Delegated Regulation. Hence, Market Participants shall keep in mind that the Commission Delegated Regulation may differ from the draft RTS in the ESAs’ final reports from 4 February and 22 October 2021.
Disclosures under Article 5 and 6 of the Taxonomy Regulation (TR)
Article 5 and Article 6 from the Taxonomy Regulation, which shall be incorporated in the pre-contractual and periodic disclosures, are already in force and must be disclosed as of January 1st, 2022:
- Transparency of environmentally sustainable investments for Art 9 Products (Art 5, TR): Financial market participants (FMPs) are expected to provide an explicit disclosure in percentage regarding taxonomy alignment of the investments underlying the financial product. Information on taxonomy-eligible activities should not be provided as part of the disclosure of the extent to which investments underlying the financial product are in taxonomy-aligned economic activities.
- Transparency of environmentally sustainable investments for Art 8 Products (Art 6, TR): in addition to the numerical disclosure of taxonomy-alignment a qualitative clarification explaining how the financial product addresses the determination of the proportion of taxonomy-aligned investments of the financial product can be disclosed.
Use of estimates
For the taxonomy alignment reporting on periodic disclosures (Art 11, SFDR) FMPs may rely on equivalent information on taxonomy-alignment obtained directly from investee companies or from third party providers for the cases, where investee companies do not have readily available information.
Our Regulatory Watch Team is monitoring closely the development of the SFDR Requirements and will inform you as far as any updates are available.
Our level 1 pre-contractual disclosures cover already today the taxonomy-alignment requirements according to Art 5 & 6 TR.
In terms of the Level 2 RTS Requirements, cleversoft is offering the whole spectrum of the relevant SFDR Disclosure requirements. Cleversoft has already implemented first periodic and pre-contractual disclosure based on the RTS Templates and has first clients, using them in their daily business during the interim period.