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SFDR – client note on revised Level 2 RTS

The European Supervisory Authorities have revised their draft Level 2 measures under the SFDR. Our note looks at the key aspects that affect asset managers.

09 February 2021

Publication

On 4 February 2021, the European Supervisory Authorities (the ESAs) published an updated draft version of the Regulatory Technical Standards (the draft RTS) which will sit underneath the Sustainable Finance Disclosure Regulation (the SFDR).

The RTS provides technical detail on how in-scope firms must comply with the headline disclosure obligations specified in SFDR.

The updated draft RTS replaces the consultation draft which was originally published in April 2020 (the April 2020 draft).  The April 2020 draft was - overall - very poorly received by the asset management industry, which identified significant flaws with the proposals

The February 2021 draft RTS has rectified some of the concerns over the April 2020 draft, particularly relating to the principal adverse impact regime.  It should therefore be cautiously welcomed by firms in-scope of SFDR. 

Some questions, though, remain unresolved or unaddressed, and we draw these out in our new note on the 'Top ten things that asset managers need to know about the revised RTS'

Our note looks at the following issues

Scope and purpose

  1. What is the draft RTS? When does it come into force?

  2. Who is subject to the draft RTS? Is the draft RTS relevant to UK and other non-EU firms?

  3. How should in-scope firms approach principles-based compliance?

Principal adverse impacts - disclosure regime

  1. Does the draft RTS address the concerns about the PAI indicators in the April 2020 draft?  Can we differentiate between different asset classes, and between long and short positions?

  2. Does the draft RTS confirm what qualitative impact the consideration of PAI should have on a firm's investment process?

  3. Does the draft RTS clarify the calculation mechanisms for the qualitative disclosures? Does the draft RTS clarify which products managed by a manager are in-scope?

  4. When is the first PAI report due?

Article 8 and 9 product disclosures

  1. Does the draft RTS change the definition of article 8 or article 9 products?

  2. Is there a prescribed format for pre-contractual disclosures?

  3. Does the draft RTS provide any further clarity on website disclosures?

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.

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