Ireland - Our survey says…
In December 2022, the Central Bank of Ireland (CBI) published an information note clarifying disclosures, investment processes and risk management. “The Central Bank is taking a very pragmatic approach,” says Katrina Crampton, senior associate at Zeidler Group. “It has not deviated from the European regulator but has provided detailed guidance instead, particularly around disclosures in fund documents.”
The CBI has announced a second round of its ‘Gatekeeper Review’. Following SFDR Level 1, it conducted a sample study that assessed the sufficiency of fund information provided to investors and possible sustainability risks in funds. In December 2022, it conducted a fast-track procedure for SFDR Level 2 and announced a similar review to be carried out in due course.
Regarding Article 6 disclosures of sustainability risks and taxonomy alignments, the regulator highlights a large amount of generic language and clarifies that disclosures must be specific to the investment fund in question. “The Central Bank of Ireland highlighted a large amount of generic language included in the disclaimers,” comments Crampton. “These are the result of lacking guidance at the time, which left market participants uncertain about the level of detail required and should be revisited.”
When it comes to the quantification of taxonomy alignment, only a small number of funds initially provided a percentage proportion of investments in environmentally sustainable economic activities. A large number of funds stated an inability to provide this information, with some including negative justifications or ambiguous ones, which are not permissible as per EU Commission guidance.
Stressing this as an area of improvement, the CBI further states that funds should provide a detailed outline why certain sustainability risks are not relevant or their integration into the investment process, including information on possible impacts on returns.
Similar to Germany, the CBI addresses confusion around the term “promotion” of an Article 8 fund but does so rather generically, stating that it supports further clarification at the European Union level.
However, for the foreseeable future it will focus on funds with proportionally low levels of promoting environmental and social characteristics as it fears possible greenwashing. In line with this and particularly around pre-contractual product disclosures, the regulator expects a higher level of monitoring on an ongoing basis from GPs.
Overall, the Irish regulator seems to be taking a pragmatic approach. By conducting its own review instead of a Q&A session, the institution is proactively engaging with the industry and providing guidance. While these instructions seem to be less detail-oriented than those provided by other countries such as Germany, the guidance covers large parts of the regulation and the industry views Ireland’s approach as one of the more successful ones when it comes to implementing the SFDR.