Asset Management & Investment Funds: EU & International Developments – April 2023

SFDR/ Taxonomy

Q&As on the interpretation of SFDR

A third set of Q&As on the interpretation of the Sustainable Finance Disclosure Regulation (SFDR) was published. The questions were submitted by the European Supervisory Authorities (EBA, EIOPA and ESMA, together the ESAs) and answered by the European Commission (EC), giving clarity on:

  • the definition of sustainable investment
  • transition plans
  • carbon emissions reductions
  • principal adverse impacts (PAIs)
  • periodic disclosures frequency

The first set of Q&As was published in July 2021 and the second set of Q&As was published in May 2022. Coinciding with the publication of the third set of Q&As, amendments to the first and second Q&As on the interpretation of SFDR were published.

You can read more about the detail of the Q&As here.

Taxonomy Regulation

The EC published two draft delegated acts relating to the EU Taxonomy Regulation.

The first draft delegated act provides a new set of technical screening criteria for the four environmental objectives pursuant to Article 9 (c) to (f) of the EU Taxonomy Regulation:

  • the sustainable use and protection of water and marine resources
  • the transition to a circular economy
  • pollution prevention and control
  • the protection and restoration of biodiversity and ecosystems

It also provides amendments to the Taxonomy Disclosures Delegated Act.

The second draft delegated act amends Delegated Regulation (EU) 2021/2139 (the Climate Delegated Act) to add or complement the technical screening criteria for climate change mitigation for certain economic activities in the transport and manufacturing sectors.

The draft delegated acts are open for feedback until 3 May 2023.

You can read about these proposals and read about the launch of the EU Taxonomy Navigator website here.

Joint consultation on the review of the SFDR RTS

In response to a mandate from the EC to review and revise the SFDR Delegated Regulation, the ESAs issued an industry consultation paper (CP) containing proposals to amend PAIs and financial product disclosures contained in the SFDR RTS (RTS).

The purpose of the review is to extend and simplify sustainability disclosures for financial market participants (FMPs), including addressing some of the issues that have emerged since the SFDR entered into force in March 2021. The consultation closes on 4 July 2023.

To meet the EC's request, the ESAs are proposing:

  • an extension of social indicators for PAIs
  • refinement of a number of other PAIs
  • amendments regarding greenhouse gas (GHG) emissions targets

In addition to the guiding principles suggested by the EC, the ESAs have used their post SFDR implementation learnings to go further in their review of the RTS. This includes suggested changes to the existing disclosures of "do no significant harm" (DNSH), considered as currently leaving too much discretion to FMPs, potential simplifications of the RTS templates to be more easily understood by retail investors, and a number of other technical adjustments meant to facilitate the use of the RTS templates and the application of the disclosure standards.

Editable version of the revised SFDR templates

The ESAs have helpfully provided an editable version of the annex templates to the SFDR Regulation.

AML/CFT/Sanctions

The European Parliament has agreed its negotiating mandate on the new EU AML framework. Member States had formally established their position in December 2022. Trilogue negotiations will begin in early May.

The Wolfsberg Group published its updated Anti-Bribery and Corruption Compliance Programme Guidance.

For more information please contact a member of the Asset Management & Investment Funds team.

Date published: 2 May 2023