Asset Management & Investment Funds: EU & International Developments - Oct 2021

EU Taxonomy RTS on product disclosures - ESA final report

The final report on the EU Taxonomy-related environmental product disclosures was delivered by the ESAs to the European Commission (EC) on 22 October 2021. The ESAs comprise of the European Banking Authority or EBA, the European Insurance and Occupational Pensions Authority or EIOPA and the European Securities and Markets Authority or ESMA.

This report contains the Regulatory Technical Standards (RTS) for Taxonomy related disclosures under the Sustainable Finance Disclosures Regulation (SFDR).

This report gives the detail about the taxonomy disclosures for SFDR A8 and A9 products which promote or have environmental objectives. It contains revised pre-contractual and financial statement product templates.

The EC will scrutinise the draft RTS and decide whether to endorse them within three months of their publication. The EC has informed the European Parliament and Council that it intends to incorporate all the SFDR RTS, meaning both the original ones submitted to the EC in February 2021 as well as the ones covered in this final report, in one instrument.

The ESAs acknowledge in the report that the EC indicated an application date of 1 July 2022 for the RTS. The report does not deal with what disclosures are expected under Level 1 of the EU Taxonomy effective on 1 January 2022.

ESAs invite stakeholders' input on PRIIPs review

The ESAs opened a call for evidence regarding the PRIIPs Regulation, closing 16 December 2021. The ESAs also plan to hold a stakeholder event in Q1 2022 before finalising the advice. The review arises from the capital markets action plan and the strategy for retail investments in the EU. The input provided will feed into the ESAs' technical advice to the EC on a review of the key information document (KID) for PRIIPs.

The ESAs invite information from stakeholders on a range of topics including:

  • the use of the KID by financial advisors
  • the operation of the comprehension alert 'You are about to purchase a product that is not simple and may be difficult to understand'
  • the practical application of the existing KID rules
  • the use of digital media
  • the scope of the PRIIPs Regulation
  • differentiation between different types of PRIIPs
  • the complexity and readability of the KID
  • performance scenarios and past performance
  • Multi Option Products
  • alignment between the information on costs and other disclosures    

ESMA Newsletter and 2022 Work Programme

ESMA published the latest edition of its newsletter, which highlights recent ESMA publications. These include the launch of the retail investment strategy call for evidence/consultation on disclosures and digital distribution and a letter to the Commission calling for a delay to the mandatory buy-in regime under CSDR.

ESMA published its 2022 Work Programme highlighting a focus on supervision, sustainability, digitalisation and capital markets union. ESMA will contribute to reviews of the AIFMD, ELTIF, MMFR, the PRIIPS Regulation, Prospectus and Transparency Directives, MiFID II/MiFIR, the Short Selling Regulation and CSDR. This year will see peer reviews on depositary obligations under the UCITS Directive and AIFMD while 2023 will see a peer review on delegation and outsourcing.

ESA's 2022 Work Programme

The ESA's 2022 Work Programme issued. The ESAs will continue to foster cross sectoral consistency, as well as supervisory convergence. Work will include:

  • providing information and analysis to support the review of PRIIPs 
  • reviewing the Regulatory Technical Standards under SFDR
  • delivering an annual report to the EC on best practice on entity and product-level disclosure of the principal adverse impacts of investments on sustainability factors and making recommendations towards voluntary reporting standards
  • continuing focus on cybersecurity

Money Markets Funds

In addition to ESMA's contribution to a review of MMFR, the Financial Stability Board (FSB) published its final report on MMF resilience. The FSB plans to work closely with IOSCO. IOSCO plans to revisit its 2012 Policy Recommendation for MMFs. The European Systemic Risk Board (ESRB) also produced a working paper which concludes that the presence of weekly liquid asset requirements linked to liquidity management tools can amplify redemptions, therefore supporting the removal of the links between fees and gates and liquidity buffers.

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

Date published: 28 October 2021