April 8, 2022

The EU Commission Approved the Technical Standards for SFDR

by Detlef Glow.

On April 6, 2022, the European Commission adopted the disclosure rules on sustainable investments. These technical standards were long awaited by industry participants as they specify the exact content, methodology, and presentation for disclosing sustainability-related information to comply with the Sustainable Finance Disclosure Regulation (SFDR) (Regulation (EU) 2019/2088), which came in force on March 10, 2021. This means that asset managers and other market participants had to wait more than a year before they knew what to disclose in which format to comply with the SFDR. The clarification on measures and content may lead to the reclassification of some funds with regard to article 6, 8, and 9 of the SFDR.

As one of the main goals of SFDR is to prevent greenwashing, the requirements shall help to assess the sustainable performance of financial products by requiring detailed information from industry participants on how they tackle and reduce any possible negative impacts. This means the technical standards shall enable investors to make more educated decisions in their fund selection process.

Given the extent and technical detail of the regulatory technical standards, and envisaged amendments, the EU Commission decided to delay the application of these standards to January 2023 to facilitate the smooth implementation of the standards by product manufacturers, financial advisors, and supervisors.

Generally speaking, one could say finally the EU Commission has closed the gaps and brought action 9 of the action plan on financing sustainable growth to life. That said, the length of the process (March 2018 – January 2023) showcases the complexity of decision making processes in the EU compared to other institutions like the ISSB, which was able to launch its first two draft for the IFRS Sustainable Disclosures Standards on March 31, 2022, only five months after its inception.

The views expressed are the views of the author, not necessarily those of Refinitiv Lipper or LSEG.

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