European Commission seeks market views in SFDR focused consultation | Hogan Lovells

On 14 September 2023, the European Fee launched a targeted consultation and a public session searching for comments on Regulation (EU) 2019/2088 on sustainability-connected disclosures in the monetary services sector (SFDR).  The SFDR, which arrived into influence in March 201 sets out how monetary marketplace contributors, this sort of as asset administrators, really should communicate sustainability data to buyers.  The Commission’s in-depth consultations which will acquire spot over the up coming a few months till 15 December 2023 will analyse no matter whether the SFDR is assembly traders wants and expectations and is fit for intent.

The focused session on the SFDR

The European Commission’s qualified consultation and general public consultation are open up till 15 December 2023 and request views on the implementation of the SFDR.  In individual, the consultations are designed to assess how the SFDR performs in observe and aims to identify likely shortcomings and concerns that stakeholders have encountered regarding the concepts the SFDR establishes and the disclosures it necessitates. 

The consultations also address queries in relation to how the SFDR interacts with other elements of the European sustainable finance framework, whether there ought to be modifications to the  disclosure specifications and sights on the use of Content 8 and 9 of the SFDR as “de facto product or service labels”.  There is a suggestion in the targeted session questionnaire that the European Fee is thinking of transferring in a comparable route to the FCA in proposing a product or service labelling routine for all money merchandise as set out in the UK’s proposed Sustainability Disclosure Demands (SDR).  Presented that Article content 8 and 9 of the SFDR are at this time staying applied as de facto products labels this might not be as well astonishing but this action would reverse the primary intention of the SFDR as a disclosure regime instead than a labelling technique.  There are worries that the misuse of Content 8 and 9 as product labels increases the challenges of likely greenwashing.

The specific consultation is useful in determining the European Commission’s issues in relation to the authorized certainty and useability of the SFDR framework and its potential to deal with greenwashing.  Provided the implementation challenges that companies have described in implementing the SFDR framework, the tenure of the questions indicates that the European Fee is likely taking into consideration an overhaul of the SFDR fairly than merely tweaking selected technological demands as we saw in a relevant session before this calendar year by the European Supervisory Authorities which proposed amendments to the regulatory technical benchmarks supplementing the SFDR.  For even further facts about that consultation, make sure you see our past post in this article.

Questions of distinct desire contain those people all-around the present requirements of the SFDR and the potential issues and charges that companies may be incurring in complying with the requirements.  For illustration problem 1.10 demands respondents offer fiscal estimates for the a single-off and recurring once-a-year expenditures linked with complying with the SFDR requirements.  The reply to this problem is split into a breakdown of inner costs incurred by monetary market place participants and the exterior products and services contracted to help in complying with the requirements. 

Corporations have expressed issues about the good quality of knowledge that is offered in purchase to fulfil ESG transparency requirements and the focused questionnaire addresses this in query 1.12.  Corporations that are utilizing estimates to fill the facts gap are requested to offer more specifics about the variety of estimates employed in queries 1.12.4. 

Of interest in relation to the categorisation of items is question 1.13 which requests irrespective of whether respondents have enhanced their offerings of economic goods that make sustainability promises due to the fact the disclosure necessities of Article content 8 and 9 of the SFDR commenced to implement. 

Following ways

Responses to the specific session are requested by an on the web questionnaire and to the community consultation by using a focused webpage by 15 December 2023. There will be an on the net event to kickstart the discussions on 10 October 2023.  The consultations will be complemented by workshops and roundtables, enabling stakeholders to post more input.  The Commission intends to undertake a report on the SFDR in Q2 2024.

[View source.]