1489313 - Hogan Lovells FIS Horizons 2021 update - Flipbook - Page 27
Financial Institutions Horizons
27
SFDR
Timeline
The SFDR imposes ESG-related disclosure
requirements on FMPs and financial advisers
(FAs), including asset managers, AIFMs and
insurance undertakings, even those which do
not have an ESG-focus.
On 10 March 2021, the majority of Level 1
SFDR requirements begin to come into effect.
This includes obligations on FMPs to publish
how they integrate sustainability into their risk
framework and to provide sustainability-related
pre-contractual disclosures. Certain provisions
requiring disclosure of adverse sustainability
impacts will come into effect after this date.
The SFDR aims to harmonize and standardize
ESG-disclosures across the EU in order to make
it easier for investors to identify impacts of their
investments on sustainability factors and the
associated risks and opportunities. Broadly,
firms subject to the SFDR will be required to: (i)
disclose and maintain certain information on their
website; (ii) provide ESG-related pre-contractual
disclosures to investors; and (iii) include ESGrelated disclosures in periodic reports provided
to investors. These key disclosures will apply:
(i) at a firm level; (ii) in respect of any financial
products that they make available, even where the
products do not have an ESG-focus; and (iii) at
an enhanced level in respect of financial products
which have an ESG-focus. The manner in which
these requirements apply to firms that are subject
to the SFDR will depend on whether the firm
constitutes an FMP and/or FA.
Taxonomy Regulation
The TR complements and amends certain
provisions in the SFDR on environmentally
sustainable activities. Similarly, this regulation
applies to and prescribes disclosure requirements
for: (i) FMPs that make available financial
products described as environmentally
sustainable; and (ii) entities which are subject to
non-financial statement requirements under the
Accounting Directive.
The TR establishes the criteria to determine which
economic activities qualify as environmentally
sustainable to make it easier for investors to
compare different investment opportunities.
This includes whether the activity does not
significantly harm or contribute to specified
environmental objectives. Although the scope
of the TR currently applies to environmental
objectives, it is envisaged that the scope of the
TR may be expanded beyond environmentally
sustainable activities, including social objectives.
The TR entered into force on 12 July 2020 but
many key provision will not apply until a later
date and will be further developed by delegated
acts. The majority of obligations apply from
1 January 2022. From this date, the first two
climate change related objectives (climate change
mitigation and climate change adaptation)
will apply. The remaining four environmental
objectives will apply from 1 January 2023.
Regulatory Technical Standards Delay
On 20 October 2020, the EU Commission
confirmed in a letter that the regulatory technical
standards (RTS) which supplement the SFDR
disclosure requirements will be delayed due
to the economic and market stress caused
by the COVID-19 crisis. The RTS will specify
requirements on the content and presentation of
the SFDR disclosures, and clarify the standards
of the underpinning methodologies. The letter
does not specify the revised compliance date for
the RTS, although this is widely thought to be in
early 2022. Importantly, however, the application
dates under the SFDR remain in effect and
therefore FMPs and FAs that are subject to the
SFDR will need to comply with its principle based
requirements from 10 March 2021.
