ESG: ESAs confirms delay to proposed amendments to SFDR RTS

In a letter published on ESMA’s website yesterday (14 November 2022), the European Supervisory Authorities (ESAs) (that is, the EBA, EIOPA and ESMA) confirmed that they would need more time for their review of the SFDR principal adverse impact (PAI) indicators and financial product disclosures.

The letter (dated 26 October) is addressed to the European Commission and states that it would not be possible for the ESAs to meet the original deadline of 28 April 2023. The ESAs notify the Commission that it will need an additional six months at least to produce proposed amendments to the SFDR RTS.

What’s the Background?

Earlier in the year (April 2022) the Commission requested that the ESAs review the PAI indicators and financial product disclosures required by the SFDR and produce proposed amendments.

Read more about the Commissions request here.

Why the delay?

The reasons for the delay indicate significant challenges caused by a number of technical components to this work and the need to seek input from a range of expert bodies or agencies. The ESAs highlight;

• the technical difficulty of the work involved in revising and extending the PAI indicators;
• that they now consider it important to develop a more objective basis to the "do no significantly harm" (DNSH) framework and to expand significantly on the social indicators;
• the need to address issues that were not fully or adequately addressed in the original RTS, such as the treatment of "equivalent information"; and
• the need to prioritise the Commission's separate mandate on amendments to the SFDR Delegated Regulation concerning fossil gas and nuclear energy amendments (adopted in October 2022 – see our insights for further information on this).

What’s next?

The ESAs have notified the Commission that they expect at least a six month delay beyond the original deadline of 28 April 2023 before they will be in a position to submit draft amendments, i.e., their proposals are unlikely to be ready until the end of October 2023 at the earliest.