European Supervisory Authorities publish Final Report and draft RTS on disclosures under SFDR

By Harrison Folland

The Joint Committee of the European Supervisory Authorities (“ESAs”) has published their final report on the draft Regulatory Technical Standards (“RTS”) regarding disclosure measures under the Sustainable Finance Disclosure Regulation ("SFDR").

The main proposals focus on:

• Entity level principal adverse impact disclosures; and
• Product level disclosures relating to:
  • Pre-contractual information
  • Information on the entity’s website
  • Information in periodic reports
  • Information in relation to the ‘do not significantly harm’ principle.

A copy of the RTS themselves are set out in section 3 of the report. An overview of the main proposals can be found on ESMA’s website.

The proposed RTS aim to strengthen protection for end-investors by improving Environmental, Social and Governance (ESG) disclosures to end-investors on the principal adverse impacts of investment decisions and on the sustainability features of a wide range of financial products. This, the ESAs believe, will help to respond to investor demands for sustainable products and reduce the risk of greenwashing.

The European Commission is expected to endorse the RTS within 3 months of their publication. While EU financial market participants and financial advisers are required to apply most of the provisions on sustainability-related disclosures laid down in the SFDR from 10 March 2021, the application of the RTS will be delayed to a later date. The ESAs have proposed in the RTS that the application date should be 1 January 2022.

The final report takes into account feedback received by the ESAs on the consultation paper launched in April 2020.