European Commission Pushes Back Implementation of SFDR Sustainable Investment Product Disclosures to 2023
The European Commission has decided to push back the implementation of disclosure requirements under the Sustainable Finance Disclosure Regulation (SFDR) related to sustainable investment products by financial market participant to January 2023, its second delay, resulting in application of the rules coming into place a year past the initially planned date.
The delay refers to the implementation of the Regulatory Technical Standards (RTS) supplementing the SFDR, and for disclosures to label products that make sustainable investments (‘Article 8’ or ‘Article 9’ labelled products).
In a letter from John Berrigan, European Commission Deputy Director-General for Financial Stability to the Council of the European Union, Berrigan deferred the application of the RTS in order to “facilitate the smooth implementation of the delegated act by product manufacturers, financial advisers and supervisors.”
The EU SFDR forms part of the EU’s Action Plan on financing sustainable growth. The regulation establishes harmonised rules for financial market participants including investors and advisers on transparency regarding the integration of sustainability risks and the consideration of adverse sustainability impacts in their processes and the provision of sustainability‐related information with respect to financial products. The regulations require financial market participants and asset owners to provide disclosures including the manner in which sustainability risks are integrated into their investment decisions, and assessments of the likely impacts of sustainability risks on the returns of financial products.
The RTS include guidelines for financial market participants and financial advisors must follow in order to align their products with their desired label, and requirements for them to disclose on their websites regarding the principal adverse impacts that investment decisions have on sustainability factors, based on a list of indicators encompassing climate and environment, as well as social and employee matters, respect for human rights, anti-corruption and anti-bribery aspects.
The SFDR regulations went into effect in March 2021, with the application of the RTS, drafted by Europe’s three primary financial regulatory agencies, the European Supervisory Authorities (ESAs), originally anticipated for January 2022. Earlier this year, the European Commission delayed implementation to July 2022 in order to bundle all of the RTS into a single act. According to the new letter, the decision to push back to 2023 was made due to the “length and technical detail” of the standards, requiring “additional time in the adoption process.”