On 8 July 2021, the European Commission (EC) informed the European Council that the implementation of level 2 of the Sustainable Financial Disclosure Regulation (SFDR), known as the Regulatory Technical Standards (RTS), will be delayed by six months from 1 January 2022 until 1 July 2022. The RTS contains detailed rules on the content, methodologies and presentation of sustainability disclosures which asset managers and financial advisers are now required to make to EU investors.
The EC had the following reasons for the delay:
- the length and technical detail of the RTS;
- the late submissions to the EC following consultation on the RTS;
- amendments which the EC is currently envisaging making to the RTS; and
- to facilitate the smooth implementation of the RTS by product manufacturers, financial advisers and supervisors.
This delay is following reports in the trade press that the EC is also working on responding to concerns raised by some national regulators over flaws in SFDR. These include the risk that it is resulting in some firms incorrectly self-certifying a large proportion of their products as meeting the enhanced ESG characteristics described in SFDR Articles 8 and 9 (i.e. greenwashing).
The delay is welcomed by in scope asset managers and financial advisers (for example, non-EU managers marketing a fund in the EU; or an EU manager). It allows them more time to comply with the onerous, detailed disclosure requirements. There is also hope that the envisaged RTS amendments by the EC might bring greater clarity on some of the more complex RTS disclosure obligations. Although such clarity should not be relied upon by firms as it is not guaranteed.
By way of reminder, the delay does not impact the Taxonomy Regulation and a number of the Taxonomy Regulation disclosure obligations start applying from 1 January 2022 (see our previous article for more details). Therefore, asset managers and financial advisers with products within scope of the Taxonomy Regulation will still need to review and potentially update their investor disclosures to comply at the end of the year.