ESA publishes final report and draft RTS on disclosures under SFDR
As of 10 March, all financial market participants must disclose how they deal with sustainability risks - at company level and for their products. Furthermore, negative impacts from sustainability factors (PAI=Principal Adverse Impact Indicators) must also be disclosed. The customers of the financial market participants should thus be given the opportunity to compare different investment products with regard to these impacts.
What exactly are sustainability risks?
The SFDR (= Regulation (EU) 2019/2088 27 November 2019 on sustainability-related disclosure requirements in the financial services sector, in short "Sustainable Finance Disclosure Regulation") defines a sustainability risk as "an event (...) in the environmental, social or governance fields, the occurrence of which could actually or potentially have a material adverse effect on the value of the investment". This refers, for example, to the effects of climate change such as storms, floods or forest fires on investments.
What exactly are Principal Adverse Impact Indicators (PAI)?
The Principal Averse Impact Indicators aim to improve sustainability factors. Financial market participants must use these indicators to disclose how they take into account negative impacts of their investment decisions on sustainability factors and how successful they have been in doing so.
What is the schedule?
04 February 2021
The European Supervisory Authorities (ESAs) publish a revised proposal for the Regulatory Technical Standards (RTS) and thus concretise the requirements of the SFDR. In particular, it explains which PAIs are to be observed in which cases.
The RTS still have to be confirmed by the European institutions - Commission and Parliament. At present, however, it is assumed that there will be no significant changes and that they will come into force on 1 January 2022.
10 March 2021
Financial market participants and financial advisors must disclose in their pre-contractual documents and on their website whether and, if so, in what way they pursue sustainability objectives with their products or at least take into account significant negative impacts on sustainability factors. Even for products to which this does not apply, there are obligations to publish certain information.
30 June 2021
"Large" financial market participants with more than 500 employees must use the PAI to demonstrate how they deal with negative impacts from sustainability factors. Smaller companies can avoid this obligation, but must at least justify it.
Earlier deadlines if applicable for asset managers
This is the case if their products are investment options in unit-linked life insurance policies. In these cases, the insurance undertakings need the corresponding information at the fund level earlier in order to be able to fulfil their disclosure obligations in a timely manner.
