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    ESAs Propose Changes to Regulatory Standards Under SFDR

    The European Supervisory Authorities (ESAs) are consulting on, until July 04, 2023, amendments to the Delegated Regulation 2022/1288, of the Sustainable Finance Disclosure Regulation (SFDR), regarding principle adverse impact indicators and financial product disclosures. The consultation seeks to address issues that have emerged since the introduction of SFDR and to extend and simplify sustainability disclosures. The proposed changes relate to the "do no significant harm" disclosure design options, simplification of the templates, and other technical adjustments. ESAs also published a set of questions and answers (Q&A), along with the related annex documents, on the interpretation of SFDR Regulation.

    The European Commission had mandated the Joint Committee of the ESAs to review and revise the regulatory technical standards laid down in the Delegated Regulation 2022/1288, which supplements SFDR (Regulation 2019/2088), with regard to the regulatory technical standards specifying the details of the content and presentation of the information in relation to the principle of "do no significant harm," the sustainability indicators and adverse sustainability impacts, and the promotion of environmental or social characteristics and sustainable investment objectives in precontractual documents, on websites and in periodic reports. The purpose of the review is to broaden the disclosure framework and address certain technical issues that have emerged since the SFDR was originally agreed. ESAs have taken the opportunity of this mandate to also provide adjustments to other sections of the Delegated Regulation. ESAs propose technical revisions to the SFDR Delegated Regulation by simplifying pre-contractual and periodic disclosure templates for financial products and making other technical adjustments concerning, among others, the treatment of derivatives, the definition of equivalent information, and provisions for financial products with underlying investment options. The authorities seek feedback on the amendments that particularly envisage:

    • extending the list of universal social indicators for the disclosure of the principal adverse impacts of investment decisions on the environment and society, such as earnings from non-cooperative tax jurisdictions or interference in the formation of trade unions
    • refining the content of other indicators for adverse impacts and their respective definitions, applicable methodologies, formulae for calculation as well as the presentation of the share of information derived directly from investee companies, sovereigns, supranationals or real estate assets
    • adding product disclosures regarding decarbonization targets, including intermediate targets, the level of ambition, and how the target will be achieved

    After considering the comments received, ESAs will prepare a final report and submit it to the European Commission by the end of October 2023.


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    Keywords: Europe, EU, Banking, SFDR, Disclosures, Sustainable Finance, ESG, GHG Emissions, Social Risk, Reporting, Q&A, ESAs, EBA

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