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On 23 October 2025, the Central Bank of Ireland (CBI) released its feedback report on the 2024 European Securities and Markets Authority (ESMA) Common Supervisory Action (CSA) assessing fund management companies’ (FMCs) compliance with sustainability related disclosures and risk integration requirements (Feedback Report).
This review, which forms part of a broader European regulatory focus on sustainable finance, assessed how Irish FMCs are complying with the Sustainable Finance Disclosure Regulation (SFDR), Taxonomy Regulation, and AIFMD and UCITS Directive Level 2 requirements on the integration of sustainability risks.
While the CBI found that there was broad alignment with regulatory expectations and an appetite to comply with SFDR requirements, the CBI identified areas where it expects improvement. The CBI has issued Risk Mitigation Programmes (RMPs) to certain FMCs, and its report contains specific expectations for FMCs to action.
The CBI expects that the findings and expectations outlined in the Feedback Report are considered and actioned at board level and with relevant personnel, including the good, below average and non-compliant practices identified in the ESMA Final Report, which you can read about here.
Key findings
The following key themes and outcomes emerged from the review.
Integration and oversight of sustainability risks
The CBI found that all FMCs have integrated sustainability risks into decision-making and organisational processes to some degree, but practices vary. Some use regular and ad hoc sustainability risk reporting to boards and committees, risk dashboards, and embed sustainability risk into management frameworks and the three lines of defence.
For index-tracking funds, some FMCs perform initial due diligence and sustainability risk assessments when selecting indices but then rely heavily on index providers for ongoing compliance with Article 8 and 9 criteria. The CBI expects the ESG criteria applied by the index should be detailed in the binding elements of the strategy used to attain each of the environmental or social characteristics promoted by the fund, or the sustainable investment objective (as relevant). It is not sufficient to provide that tracking the performance of the index is the fund’s binding element.
For active strategies, the CBI observed that some FMCs set sustainability risk thresholds or criteria, integrating this into the initial fund selection and due diligence process and automate these restrictions into pre and post trade execution systems.
Where FMCs depend on delegate attestations (that criteria relating to the fund portfolio and Article 8 and 9 requirements are complying), the CBI expects sufficient supporting information to evidence how they were satisfied as to the appropriateness of the attestation and SFDR compliance.
While many FMCs dedicated significant resources to the fund and delegate onboarding and oversight and monitoring of the funds to ensure SFDR compliance, the CBI notes that some had limited levels of oversight across their fund ranges. Inadequate control frameworks for robust and effective delegate oversight and sustainability risk monitoring across all funds under management led to RMPs being issued to certain firms. The expectation is that FMCs maintain documented, effective, robust and effective control frameworks, including effective ongoing due diligence of funds, data and delegates, as well as consistent independent monitoring across all funds.
The CBI expects FMCs to continue to monitor their level of resourcing, skills, knowledge and expertise on an ongoing basis relevant to the nature, scale and complexity of their funds in scope of Article 6, Article 8 and Article 9.
Data constraints and due diligence
Data availability, consistency and cost remain significant constraints, leading many FMCs to use multiple providers and to interpret similar data differently. This contributes to divergent monitoring outcomes and, in some cases, insufficient information to independently assess fund compliance.
Most funds disclosing under Article 8 or Article 9 disclosed a 0% minimum commitment to taxonomy-aligned investments because of data gaps, and some apply a significant buffer between the actual and minimum percentage of taxonomy aligned and sustainable investments to avoid breaches. At entity level, many firms do not consider PAI on their investment decisions on sustainability factors at entity level due to data limitations.
The CBI expects FMCs to identify data constraints early in product design and onboarding, perform ongoing due diligence on data and data providers, and enhance controls as data becomes more readily available to ensure that the data used to substantiate the requirements of SFDR is accurate, reliable and up to date. FMCs are expected to document and verify the underlying data used to substantiate SFDR compliance where they use attestations to conduct fund monitoring and oversight.
Clear and transparent disclosures
The CBI’s findings in relation to disclosure requirements largely reflected its ongoing feedback to industry through UCITS prospectus documentation reviews.
The CBI identified a need for greater transparency and specificity in some fund disclosures identifying vague language when describing the sustainable investment objective or the promotion of environmental or social characteristics, Some disclosures lacked clear metrics, thresholds or key terms that could be quantifiably assessed. These gaps increased the risk that investors may not fully understand the sustainability characteristics or objectives of the fund. Inconsistent approaches to website disclosures were also noted, such as inaccessible links to index methodologies.
The expectation is for FMCs to have robust frameworks to ensure that disclosures are clear and not misleading with clear and detailed disclosure regarding the binding elements used to attain each of the environmental or social characteristics promoted by the fund, or the sustainable investment objective. For exclusions as a binding element of the strategy, there should be clarity regarding the thresholds applied, what constitutes “involvement” or the ESG score that would result in a fund excluding certain companies from investment. There should be no option within the disclosure to disapply the binding element of the strategy. For index tracking funds, the ESG criteria applied by the index should be detailed in the fund’s binding element, not merely that tracking the performance of the index as the fund’s binding element.
FMCs should have processes in place to regularly review and approve prospectus language, website and periodic annual report disclosures to ensure alignment and compliance with SFDR. Reviews should be documented and conducted periodically.
Regulatory interpretation and forthcoming reform
FMCs expressed a need for enhanced guidance and criteria on key SFDR concepts, such as the definition of “sustainable investments”. They considered that frequent changes in guidance have led to compliance challenges. This has resulted in conservative and inconsistent application across the industry. The CBI recognises that reform of the SFDR by the European Commission will take time but expects firms to prioritise clarity and transparency now, and to consider how disclosures will be understood by investors. Updates or new guidelines should be considered and implemented without delay.
Scope and methodology
The CBI’s review covered a representative sample of firms managing approximately 60% of assets under management in Ireland, including a mix of small, medium, and large firms with a variety of SFDR Articles 6, 8, and 9 funds. The assessment was conducted through a combination of desk-based reviews and on-site inspections, supported by a proprietary ESG dashboard tool. The questionnaire, developed by ESMA and national competent authorities, comprised 54 qualitative and quantitative questions spanning integration of sustainability risks and factors, entity and product level disclosures, fund specific information, greenwashing definitions, conflicts of interest, remuneration, taxonomy percentages, “do no significant harm”, engagement and Principal Adverse Impact (PAI) disclosures.
What should fund management companies do now?
As mentioned above, the CBI expects that the findings and expectations outlined in its Feedback Report are discussed at board level and with relevant personnel, including the good, below average and non-compliant practices identified with the ESMA Final Report. Boards should ensure that appropriate measures and controls are in place to address the CBI’s observations.
Conclusion
The CBI’s Feedback Report underscores the increasing regulatory scrutiny of sustainability-related practices in the funds industry and confirms that the CBI will incorporate the CSA’s key findings and observations into ongoing supervision. The CBI is continuing to enhance its data capabilities and indicates that it will further embed its assessment tools in its supervisory engagements. While FMCs have made progress, significant work remains to ensure that sustainability risks are effectively integrated and disclosed. Boards and senior management should take a proactive approach to addressing the CBI’s expectations.
For more information, please contact any member of A&L Goodbody's Asset Management & Investment Funds team.
Date published: 7 November 2025
