The disclosures relate to financial products that make sustainable investments contributing to environmental objectives.
The three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) have delivered to the European Commission (EC) their Final Report
with draft Regulatory Technical Standards (RTS) regarding disclosures
under the Sustainable Finance Disclosure Regulation (SFDR) as amended by
the Regulation on the establishment of a framework to facilitate
sustainable investment (Taxonomy Regulation). The disclosures relate to
financial products that make sustainable investments contributing to
environmental objectives.
The draft RTS aim to:
- provide disclosures to end investors regarding the investments of
financial products in environmentally sustainable economic activities,
providing them with comparable information to make informed investment
choices; and
- establish a single rulebook for sustainability disclosures under the SFDR and the Taxonomy Regulation.
Main proposals
The Report contains the following proposals:
- For products under Articles 5 and 6 of the Taxonomy Regulation
- inclusion of pre-contractual and periodic disclosures that identify
the environmental objectives to which the product contributes and show
how and to what extent the product’s investments are aligned with the EU
Taxonomy
- for measuring how and to what extent activities funded by the
product are aligned with the EU taxonomy, the proposals consist of two
elements:
- two graphs showing the taxonomy-alignment of investments of the
financial product based on a specified methodology that calculates that
alignment; and
- an assurance provided by an auditor or a review by a third party
that the economic activities funded by the product that qualify as
environmentally sustainable are compliant with the detailed criteria of
the Taxonomy Regulation.
- For pre-contractual and periodic disclosures
- inclusion of annexes with amendments to the mandatory templates for
financial products that promote environmental and/or social
characteristics or have a sustainable investment objective as defined in
the SFDR, so that they include additional disclosures for Article 5 and
Article 6 products under the Taxonomy Regulation.
Treatment of Sovereign Bonds
Regarding the specific issue of the treatment of sovereign bonds in
the representation of the taxonomy-alignment of investments, the ESAs
decided to require the disclosure of the taxonomy-alignment of
investments in two ways: one including sovereign exposures and one
excluding sovereign exposures from the calculation.
To protect investors from the risk of greenwashing, the draft RTS
contain a graph which includes all the investments of the financial
product in the calculation. As there is no appropriate methodology to
assess the taxonomy-alignment of sovereign bonds, the ESAs added a
second graph showing the taxonomy-alignment of the financial product
where all sovereign exposures are excluded from the calculation.
Next steps
The EC will scrutinise the draft RTS and decide whether to endorse
them within 3 months of their publication. The Commission has informed
the European Parliament and Council that it intends to incorporate all
the SFDR RTS, meaning both the original ones submitted to the Commission
in February 2021 as well as the ones covered in this Final report, in
one instrument.
ESAs
© ESMA
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