ESG: Commission Q&A on SFDR published

As we reported earlier this month, on 10 December 2021 (though not published until 13 May 2022), the European Supervisory Authorities (ESAs) submitted a number of questions to the European Commission, seeking important clarification on certain key open questions on how to interpret aspects of the Sustainable Finance Disclosures Regulation (SFDR) and the Taxonomy Regulation.

The Commission has now published a new Q&A document (dated 17 May 2022 but published on 25 May 2022) in response to these questions.

Firms subject to SFDR will need to carefully scrutinise and take on board the guidance - particularly as several of the Q&A materially change the prevailing understanding on how SFDR applies.

Our client note sets out a summary of the new guidance as relevant to firms subject to SFDR along with our comments on this. 

The questions can be grouped into four broad themes:

(1) Product-level compliance with the principal adverse impact (PAI) regime in situations where the manager does not comply with entity-level PAI

(2) How SFDR disclosure requirements apply to pre-existing open and closed products

(3) Good governance requirements for article 8/9 products

(4) How the Taxonomy-alignment disclosures apply to article 8/9 products which don't actively pursue environmental objectives  

There are also Q&A which relate to financial advisers, which we have summarised in an annex to our note.