Angelo Lercara LL.M. EuR
Munich +49 89 21 21 63 15
Frankfurt +49 69 77 06 19 4228
Commission Delegated Regulation (EU) 2022/1288, setting out the regulatory technical standards (RTS)1 to be used by financial market participants (FMPs) when disclosing sustainability-related information under the Sustainable Finance Disclosures Regulation (SFDR),2 was published on 25 July 2022 in the Official Journal of the EU (OJ). The RTS will apply from 1 January 2023.3
On 17 November 2022 – less than six weeks before the SFDR RTS ‘go live’ date – the European Supervisory Authorities (ESAs)4 published a “Questions and Answers”5 on the RTS (Q&A). The Q&A is very detailed, comprising 60 questions over 34 pages and including worked examples, tables of guidance and decision trees.
The Q&A covers many topics – not all of which relate to the RTS, despite the title of the Q&A – under the following broad Sections:
This is not the first time that SFDR questions and answers have been published6 and previous questions and answers are cross-referenced in the latest publication. However, while the Q&A is meant to provide clarification, some of the responses are opaque and may not add the clarity desired.
Some items to note for asset managers addressed in Sections (1), (2), (3) and (5) of the Q&A
To highlight just a few of the Q&A that may be of interest:
The ESAs' Q&A provides some additional information and guidance but there are many questions still outstanding that FMPs are trying to deal with in the run up to 1 January 2023. In addition, the EU Commission has stated10 that it intends to publish a set of Q&As on the SFDR early in 2023, which may address concerns relating to the application of fundamental concepts in the SFDR, legal and reputational risks, and greenwashing. In the same speech, the EU Commission stated that it plans to publish over 200 FAQs intended to support businesses with reporting obligations under the Taxonomy Regulation. Providing information this close to the RTS coming into force and with further information to come shortly after may not be seen by all as a welcome development.
This update was authored by Angelo Lercara, Mikhaelle Schiappacasse, Katie Carter and Philippa List.
1) Commission Delegated Regulation (EU) 2022/1288 of 6 April 2022 supplementing Regulation (EU) 2019/2088 of the European Parliament and of the Council with regard to regulatory technical standards specifying the details of the content and presentation of the information in relation to the principle of ‘do no significant harm’, specifying the content, methodologies and presentation of information in relation to sustainability indicators and adverse sustainability impacts, and the content and presentation of the information in relation to the promotion of environmental or social characteristics and sustainable investment
objectives in pre-contractual documents, on websites and in periodic reports is available here.
2) Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector, as amended by Regulation (EU) 2020/852 on the establishment of a framework to facilitate sustainable investment (Taxonomy Regulation).
3) For more information, see our OnPoint “RTS under the SFDR published in the Official Journal”, available here.
4) The ESAs are the European Securities and Markets Authority (ESMA), the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA).
5) The November 2022 “Q&A” are available here.
6) For example on 26 July 2021, the EU Commission published its
long-awaited questions and answers which attempted to respond to the ESAs’ specific questions. To access the EU Commission’s response please click here. A technical amendment was issued by the EU Commission in November 2021, which is available here.
7) Regulation (EU) No 236/2012.
8) Article 2(17) of SFDR defines ‘sustainable investment’ as an investment in an economic activity that contributes to an environmental objective, as measured, for example, by key resource efficiency indicators on the use of energy, renewable energy, raw materials, water and land, on the production of waste, and greenhouse gas emissions, or on its impact on biodiversity and the circular economy, or an investment in an economic activity that contributes to a social objective, in particular an investment that contributes to tackling inequality or that fosters social cohesion, social integration and labour relations, or an investment in human capital or economically or socially disadvantaged communities, provided that such investments do not significantly harm any of those objectives and that the investee companies follow good governance practices, in particular with respect to sound management structures, employee relations, remuneration of staff and tax compliance.
9) Commission Delegated Regulation (EU) 2020/1818 of 17 July 2020 supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council as regards minimum standards for EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks.
10) This statement was made in a speech given by Mairead McGuinness, European Commissioner for Financial Services, Financial Stability and Capital Markets Union, on 5 December 2022. The speech is available here.