The neverending SFDR story

The joint committee of the European Supervisory Authorities (ESAs) has published a consultation paper on the proposed Regulatory Technical Standards (RTS), regarding the content and presentation of disclosures under the SFDR.

The European Commission has ordered the review with the aim of addressing technical issues concerning sustainability indicators in relation to principal adverse impacts (PAIs) and amending the RTS to include greenhouse gas emissions reduction targets.

Further, the ESAs see the reform as an opportunity to “broaden the disclosure framework” and introduce further alterations.

To this end, they have proposed changes to the current disclosure framework, including:

• An extended list of universal social indicators for PAI disclosure such as earnings from non-cooperative tax jurisdictions or interference in the formation of trade unions
• Amendments to the content of other indicators and their definitions, methodologies, calculation formulae, share of information from portfolio companies, sovereigns, supranationals or real estate assets
• Adding product disclosures for decarbonisation targets, including intermediate targets, levels of ambition and how they will be achieved.

Additionally, the ESAs are looking to revise the technical aspects of the SFDR Delegated Regulation through:

• Improving the disclosures on how sustainable investments cause no significant harm to the environment and society
• Simplifying pre-contractual and periodic disclosure templates for financial products
• Technical adjustments concerning derivatives, the definition of equivalent information and provisions for financial products with investment options.

Next steps
According to the ESAs, comments should be submitted until 4 July 2023 via an online response form.

The supervisory authorities stress that any comments provided need to indicate specific points to which they relate, contain a clear rationale and evidence, as well as alternative regulatory choices for the ESA.

All contributions will be published after close of the consultation unless otherwise indicated, and standard confidentiality clauses will not be considered as such an indication.