RTS under the SFDR published in the Official Journal

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.

Background

The SFDR mandated the ESAs³ to develop RTS to further specify the content, methodologies and presentation of information to be provided pursuant to various provisions of the SFDR.

The ESAs previously submitted draft RTS to the EU Commission in April 2020 and February 2021, and final draft RTS were submitted in October 2021.⁴ In a letter dated 8 July 2021,⁵ the ESAs stated their intention was to “bundle all 13 of the regulatory technical standards in a single delegated act”. A delegated act comprising all the various RTS required under the SFDR was adopted and published by the EU Commission on 6 April 2022.⁶

Publication and Date Of Application

Following their adoption, the RTS were then subject to a period of scrutiny by the European Parliament and the Council as part of the legislative process. The final RTS have now been published in the OJ.

The date of application of the RTS has been subject to numerous delays.⁷ As was anticipated, the RTS will apply from 1 January 2023.

Notwithstanding the date of application is 1 January 2023, the recitals to the RTS confirm that it is necessary for FMPs to have considered principal adverse impacts (PAI) of investment decisions on sustainability factors⁸ by 31 December 2022 and to publish the information on those impacts by 30 June 2023. More importantly, the recitals state the first reference period for this reporting under the RTS will be 1 January 2022 to 31 December 2022, namely a period falling prior to the effective date of the RTS.

But...

It is worth noting that on 8 and 11 April 2022, the EU Commission sent two letters to the ESAs asking them to (i) propose amendments to the RTS in relation to the information that should be provided about financial products’ exposures to gas and nuclear activities by 20 September 2022, and (ii) propose amendments to the RTS in relation to PAI indicators and transparency by financial products within 12 months of the mandate letter – indicating that subsequent changes may be made to the RTS.⁹ The ESAs’ mandates from the EU Commission were not expected at this phase, and the mandate to propose amendments to the RTS in respect of PAI indicators could cause FMPs a significant amount of disruption in the future.

Conclusion

Publication of the RTS means that FMPs can now move forward with a degree of certainty when preparing their disclosures under the RTS for 1 January 2023.

Footnotes

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) The European Insurance and Occupational Pensions Authority, the European Securities and Markets Authority and the European Banking Authority.

4) See our OnPoint on the final draft RTS, available here.

5) The ESMA letter is available here.  

6) See our OnPoint on the EU Commission’s adoption of the RTS in April 2022, available here.

7) See our OnPoint on the delays to the application of the RTS, available here.

8) As referred to in Article 4(1)(a) of SFDR or as required by Article 4(3) and (4) of SFDR.

9) See our OnPoint “SFDR – April/May 2022 developments”, available here.