Announcement of final report and draft RTS on disclosures under SFDR by European Supervisory Authorities

The Joint Committee of the three European supervisory authorities (EBA, EIOPA and ESMA) published the final report on the draft regulatory technical standards (RTS) on the content, methodology and presentation of disclosures under Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (SFDR) on February 4, 2021.

Purpose of the proposed RTS is to protect investors through enhancing environmental, social and governance (ESG) disclosure on the impact of investment decisions and on the sustainability features of financial products. As a result, the risk of greenwashing will be reduced and investor demand for sustainable products will be met.

Significant revisions in this final draft RTS compared to the previous draft RTS (published as part of the joint consultation paper on April 23, 2020) are:

1. PAIs (Principal Adverse Impacts) – provided an update to the list of indicators of principal adverse impacts at the company level.
2. The templates for pre-contractual and periodic disclosure under Article 8 have been updated (compared to the templates published in September 2020).
3. The templates for pre-contractual and periodic disclosure under Article 9 have been published (for the first time).
4. Website information on Article 8 and 9 products has been updated.
5. DNSH (Do Not Significantly Harm) – provided details on how to demonstrate that sustainable investments do not cause notable harm.
6. Clarification on multi-option products has been provided.

Core key challenges include:

1. Establishing clear monitoring of policies for pre-contractual and periodic reports.
2. Historical data in the regular report must take into account averaging over each period to avoid “window dressing”. 
3. Expanded requirements for product information on the website.
4. Indicator selection methodology based on probability of occurrence and severity. 
5. For MOPs: information for all options must be provided either as attachments or via links. 
6. Discretionary mandates and the like must be respected, even if they are in a password-protected area.

This report has been received by the European Commission, which is expected to endorse the RTS within three months of its publication. 

Johannes Waldheim, Head of Product Management for Asset Management, has welcomed the draft RTS to improve ESG reporting: “Active and passive funds must both provide the same information with the same information requirements. A passive fund, can simply refer to the index, but must declare this. SDFR compliant and early positioning of Article 6, 8 and 9 products with all documents and calculations is essential. With an SFDR module integrated into our reporting platform, we support our clients with ESG-compliant data, methodology reconciliation, all calculations and documents, and web services in line with the SFDR Level 1 required by March 10, 2021.”