ESG: client note top 10 talking points from the ESAs' SFDR proposals

As we reported at the time, on 4 December 2023, the European Supervisory Authorities (the ESAs) published their Final Report, containing draft Regulatory Technical Standards (RTS) on the review of PAI and financial product disclosures in the SFDR Delegated Regulation.

Our client note (add link here) summarises the Top 10 things that firms need to know about the Final Report.

The Final Report

• proposes material changes to the disclosures required under the existing SFDR RTS, which came into force on 1 January 2023, including: (i) the addition and the revisions of some PAI indicators, (ii) new decarbonisation disclosures, (iii) enhanced DNSH disclosures, (iv) broader amendments to the Article 8 and 9 disclosure templates and (v) other technical adjustments.

• includes major changes to the RTS, which many are calling SFDR 1.5.

As the European Commission is likely to endorse the ESAs' draft measures, firms subject to the SFDR -- and, in particular, to the regimes covered by the RTS - will need to engage closely with the new rules and their practical impact from now on.

We anticipate that firms will again need to make a significant effort to implement the extensive range of newly proposed amendments to the RTS.

To help them, our client note examines the following key questions:

1. What is covered in the Final Report?

2. Which firms would be subject to the changes proposed in the Final Report?

3. The PAI regime

4. Amendments to the decarbonisation targets

5. DNSH disclosure

6. Simplification of the Articles 8 / 9 templates

7. Other technical adjustments

8. Financial products with investment options

9. ESAs open questions to the European Commission addressed in Final Report

10. What are the next steps and when would this come into force?