background and summary
The SFDR was introduced under the EU Sustainable Finance Action Plan together with the EU Taxonomy Regulation to set out extensive disclosure and reporting requirements for asset managers located in the EU or located outside the EU but distributing funds to EU clients, with respect to environmental, social and governance (“ESG”) measures on both an entity and product level. The main purpose of the SFDR is to level the playing field and ensure transparency for risks by setting out standardised disclosure requirements regarding sustainability-related information for asset managers, regardless of whether they carry out ESG or sustainability-related activities.
On 6 April 2022, the Commission adopted the RTS under the SFDR, and published this in the Official Journal on 25 July 2022 with the aim to further clarify the content, methodologies, and standards for sustainability-related disclosures in the financial services sector. As such, the RTS oblige financial market participants (“FMPs”) to make pre-contractual and website disclosures to end investors when acting as agents of such investors to ensure that reliable data is accessible for them so that they may make timely and efficient analyses for disclosure.
final RTS under SFDR
The RTS includes the templates for pre-contractual disclosures for Article 8 and Article 9 products, annual reports for Article 8 and Article 9 products and the statement for presenting key performance disclosures under the principal adverse impacts (“PAI”) regime. There have been no changes to the final draft of RTS published in April 2022.
The following table summarises the key points:
| PAI statement Website Disclosure |
Disclosure made as set out in Annex 1, including:
– descriptions of the PAIs, outlined by way of a variety of environmental and social adverse sustainability indicators;
– descriptions of policies to identify and prioritise PAIs and how policies are kept up to date and applied;
– summaries of engagement policies to reduce PAIs; and
– historical comparison of current reporting against previous reporting. |
| Article 8 Product’s Pre-Contractual Disclosure |
Disclosure must be made in accordance with Annex 2, including:
– descriptions of the environment/or social characteristics; that are promoted by the Article 8 product, including sustainability indicators;
– PAIs and the extent it has been considered;
– descriptions of investment strategy used; and
– hyperlinks to the webpage for website disclosure. |
| Article 9 Product’s Pre-Contractual Disclosure |
Disclosure made in accordance with Annex 3, including:
– descriptions of the investment objective of the Article 9 product, and a do no harm statement;
– PAIs and the extent it has been considered;
– descriptions of investment strategy; and
– descriptions of the asset allocation and minimum share of sustainable investments, to be presented in a graphical pie chart, plus a description of the underlying investments that are in environmentally sustainable economic activities. |
| Articles 8 and 9 Product’s Website Disclosure |
Disclosure made in accordance with Articles 8 and 9 should include:
– no sustainable investment objective statement;
– investment strategy;
– descriptions of the proportion of investments (see pre-contractual disclosures);
– description of monitoring of the environmental and/or social characteristics and sustainability indicators throughout the product Lifecyle; and
– methodologies to measure how environmental or social characteristics are promoted. |
For more information on the Sustainable Finance Disclosures, please see our earlier article on: Latest guidance on Sustainable Finance Disclosures (SFDR) for fund management companies.
On 25 July 2022, the European Commission (the “Commission”) published the Commission Delegated Regulation (EU) 2022/1288 (the “Regulation”) in the Official Journal, setting out the details of the Regulatory Technical Standards (the “RTS”) relating to the Sustainable Finance Disclosure Regulation (the “SFDR”) and EU Taxonomy Regulation…
