ESAs Propose Changes to Regulatory Standards Under SFDR

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.

Related Links

• Press Release on Review of SFDR Regulation
• Consultation on Review of SFDR Regulation (PDF)
• Letter from European Commission on SFDR Q&A
• European Commission Decision on SFDR Q&A
• Annex I: Q&A on Interpretation of SFDR Regulation
• Annex II: Amendments to Q&As on SFDR Regulation