On 3rd September 2020, Irish Funds responded to the Joint Consultation Paper issued by the European Supervisory Authorities (“ESAs”) in relation to ESG disclosures. In the consultation the ESAs have sought feedback on the proposed Regulatory Technical Standards (“RTS”) that will underpin the implementation of the Sustainable Finance Disclosure Regulation (“SFDR”).

In responding, Irish Funds has proposed:

  • A revised Principal Adverse Impact Statement, taking into account intended objectives of the disclosure at entity level, the need for an element of materiality to the disclosures, as well as various data challenges
  • Striking an appropriate balance in disclosures between quantitative and qualitative information to facilitate more informative and meaningful disclosure for investors and ensuring that information is disclosed in the appropriate places for the nature of that information (at entity or product level, in the prospectus, on a website, or via periodic disclosure)
  • Publication of the proposed pre-contractual disclosures templates as soon as possible to enable preparation
  • Achieving greater consistency within the EU sustainable finance regime between similar concepts and requirements in the SFRD and Taxonomy Regulation (‘do no significant harm’ versus ‘principal adverse impact’) so that the overall regime does not become internally divergent and confusing for stakeholders
  • Supporting the ESAs’ request for a delay to enable an orderly implementation, given sequencing and timing issues in the regulation. We support a delay in particular where compliance obligations are linked to the final RTS that are now delayed, under what was already a very tight timeframe (as things stand there is little over one month to make the relevant updates to thousands of fund prospectuses, which will challenge regulatory review processes). We support a delay to 1 January 2022 of certain requirements to align with the Taxonomy Regulation (which will also entail prospectus updates) in order to facilitate an orderly implementation of the EU sustainable finance regime.

In terms of next steps, the ESAs intend to finalise the draft RTS and provide them to the European Commission by the end of January 2021. The RTS will then need to be adopted by the Commission, following a three-month scrutiny period with the Council and Parliament. Compliance obligations under the SFDR commence from 10 March 2021. Irish Funds will continue to engage on the SFDR as the RTS and implementation process evolves.