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:
- PAIs (Principal Adverse Impacts) - provided an
update to the list of indicators of principal adverse impacts at the company
level.
- The templates for pre-contractual and periodic
disclosure under Article 8 have been updated (compared to the templates
published in September 2020).
- The templates for pre-contractual and periodic
disclosure under Article 9 have been published (for the first time).
- Website information on Article 8 and 9 products has
been updated.
- DNSH (Do Not Significantly Harm) - provided details
on how to demonstrate that sustainable investments do not cause notable harm.
- Clarification on multi-option products has been
provided.
Core
key challenges include:
- Establishing clear monitoring of policies for
pre-contractual and periodic reports.
- Historical data in the regular report must take
into account averaging over each period to avoid "window dressing".
- Expanded requirements for product information on
the website.
- Indicator selection methodology based on
probability of occurrence and severity.
- For MOPs: information for all options must be
provided either as attachments or via links.
- 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 at
acarda, 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."