EU SFDR draft Level 2 rules - what you need to know

On 23 April 2020, the European Supervisory Authorities (ESAs) published a joint consultation paper on their proposed regulatory technical standards (RTS) under the SFDR (the Consultation Paper). The draft RTS proposes detailed requirements that are significantly more onerous than had been expected by the industry and would represent a very significant undertaking for in-scope firms.

The SFDR (and the RTS) applies to the defined concept of financial market participant, which includes:

• MiFID firms providing the service of portfolio management;
• AIFMs; and
• UCITS Managers.

In addition, a sub-set of the rules applies to financial advisers (including MiFID firms, AIFMs, and UCITS Managers which provide standalone investment advice).

Our note summarises the Top 10 issues which asset managers need to know about the RTS, looking at:

1. What is the consultation and how does it fit into the EU ESG
   initiative?
2. What is the impact of Brexit for UK firms?
3. In overview, what areas are covered by the RTS?
4. What’s required for an adverse sustainability impacts statement?
5. What are the quantitative disclosures required to measure adverse sustainability impacts?
6. What are the narrative / qualitative disclosures required for an adverse sustainability impacts statement?
7. What product level disclosures are required for ESG focussed products?
8. What should firms be doing now?
9. Is it too early to start drafting disclosures?
10. How can Simmons & Simmons help?