Spotlight on the Regulatory Technical Standards
While many firms were racing to the 10 March finish line to prepare the disclosures required under the Sustainable Finance Disclosures Regulation (SFDR), these initial disclosures represent just a first wave while the industry awaits the more detailed implementing rules that will underpin core elements of the new disclosure framework.
Under SFDR, the Joint Committee of the European Supervisory Authorities (ESAs) of ESMA, EIOPA, and EBA were tasked with developing detailed rules, known as Regulatory Technical Standards (RTS), in relation to two key areas of the framework: Entity-level disclosures on principal adverse impact and product-level disclosures for ESG products (often known as Article 8 and Article 9 products).
The final advice from the ESAs was published on 4 February, with a suggested implementation date of 1 January 2022. This gives the industry precious little time to understand the key elements of these new requirements and put the necessary processes in place to be ready to comply by the deadline. In a supervisory statement released on 25 February 2021, the ESAs “recommend[ed] national competent authorities to encourage financial market participants and financial advisers to use the interim period from 10 March 2021 until 1 January 2022 to prepare for the application of the RTS.”
A final piece of the jigsaw puzzle, the product-level disclosures required under the Taxonomy, also due to be implemented by 1 January 2022, is still to be developed, meaning firms are likely to be further squeezed when it comes to their implementation timelines.
In this briefing note, we will seek to highlight some of the key elements of the regulatory technical standards, including changes from the drafts consulted on last year.
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