EUROPE: ESA Supervisory Statement – Sustainable Finance Disclosure Regulation

Friday February 26 2021

The European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) have published a joint supervisory statement on the effective and consistent application and national supervision of the Regulation on sustainability-related disclosures in the financial services sector (SFDR). The statement aims to achieve an effective and consistent application and national supervision of the SFDR, promoting a level playing field and protecting investors.

In the statement, the three ESAs recommend the draft RTS be used as a reference when applying the provisions of the SFDR in the interim period between the application of SFDR (as of 10 March 2021) and the application of the RTS at a later date.

The overall objective of this statement is to achieve an effective and consistent application and national supervision of the SFDR, promoting a level playing field and the protection of investors.

Delay of application date of the RTS and guidance for interim period

As clarified by the European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union in a letter sent to the ESAs on 20 October 2020 on the application of the SFDR , while 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.

As the Commission stated in that letter, “in terms of substance, the application of the Regulation is not conditional on the formal adoption and entry into force or application of the regulatory technical standards as it lays down at Level 1 general principles of sustainability related disclosures”.

In order to provide financial market participants and financial advisers with sufficient time to gather the information necessary and adjust their practices to apply the specific requirements of the RTS, and in order to provide for the alignment of the application of the RTS with the application of the amendments in Regulation (EU) 2020/852 (Taxonomy Regulation, hereinafter referred to as “TR”) to the SFDR as well as the application of periodic reporting in the SFDR, the ESAs have proposed in their draft RTS to delay the application date of the RTS to 1 January 2022.

With regard to the detailed provisions in the RTS, the proposed delay would also allow national competent authorities, as designated in accordance with the sectoral legislation referred to in Article 14 of the SFDR, to prepare for the orderly and effective supervision of compliance by financial market participants and financial advisers with those requirements.

As most of the provisions on sustainability-related disclosures laid down in the SFDR apply from 10 March 2021, the ESAs see merit in specific guidance for national competent authorities, financial market participants and financial advisers in the interim period before the application of the RTS.

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