The Sustainable Finance Disclosures Regulation ("SFDR") applied from 10 March 2021 and financial market participants, which include AIFMs, UCITS management companies and self-managed investment companies ("Fund Management Companies"), were required to comply with a number of high-level principles-based disclosure requirements by that date. These included prospectus updates and website disclosures as well as the updating or preparation of a sustainability risk policy. The SFDR Level 1 requirements are supplemented by more detailed Level 2 requirements ("SFDR RTS") and so Fund Management Companies must comply with detailed pre-contractual and annual reporting disclosures and must make these disclosures in the mandatory templates which are set out in the annexes to the SFDR RTS for relevant products. These SFDR RTS were due to apply from 1 January 2022.
In addition, from 1 January 2022, certain Taxonomy Regulation related disclosures will apply to those funds under Articles 8 and 9 SFDR that make sustainable investments with environmental objectives in accordance with the EU taxonomy. This subset of Article 8 and 9 SFDR funds (Articles 5 and 6 Taxonomy Regulation) are subject to additional disclosure requirements regarding the alignment of their investments with the Taxonomy Regulation. The European Supervisory Authorities ("ESAs") were mandated to develop additional draft regulatory technical standards to specify the details of the content and presentation of these additional disclosures. To reduce duplication and complexity with regard to SFDR disclosure, the ESAs agreed to amend the as yet to be finalised SFDR RTS (the final report on the SFDR RTS issued on 4 February 2021, and should have been adopted by May 2021), instead of creating a new ruleset. The ESAs' aim is to have the RTS on disclosures rules function as a "single rulebook" for sustainability disclosures at Level 2. The taxonomy-related SFDR disclosures were subject to a consultation that closed on 12 May 2021 and they were expected to be adopted by the ESAs and submitted to the European Commission in June 2021.
On 8 July 2021, the European Commission wrote to the European Council noting that:
"Due to the length and technical detail of those regulatory technical standards, the late submissions to the Commission, and envisaged amendments, we deem it necessary to facilitate the smooth implementation of the standards by product manufacturers, financial advisers and supervisors. We therefore plan to bundle all 13 of the regulatory technical standards in a single delegated act and defer the dates of application of 1 January 2022 by six months to 1 July 2022."
A six month deferral of the Level 2 measures is to be welcomed, however the level 1 requirements under the Taxonomy Regulation will still need to be addressed by 1 January 2022 and given the extent of the Level 2 disclosure requirements, Fund Management Companies should use this additional time to continue with their preparations to ensure compliance with the Level 2 requirements by 1 July 2022.
For more detailed information on the disclosure requirements, please see our previous briefing here (which assumed a 1 January 2022 deadline).
{ Some additional time to prepare for the detailed RTS but still some work to do for January 2022.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.