Sustainable finance: latest developments and proposals

Regulatory Technical Standards (RTS): new mandates for European Supervisory Authorities (ESAs)

• Almost immediately after announcing in April that it had adopted the RTS supplementing the Sustainable Finance Disclosure Regulation (SFDR), the European Commission invited the ESAs to propose amendments to the RTS on financial product exposures to gas and nuclear activities (by 30 September 2022) and on Principal Adverse Impact (PAI), as well as on transparency of financial products, in particular with regard to decarbonisation targets (within 12 months).
• On May 16, the ESAs submitted questions to the EC regarding the interpretation of certain obligations in the SFDR and the Taxonomy Regulation, namely disclosures of PAI at the entity and product level, obligations of financial advisers when providing advice under MiFID, as well as transparency of risk integration and rules for products that are no longer available and good governance practices.
• On May 25, the EC responses were published, clarifying the consideration of PAIs at the product level when choosing not to consider PAIs at the entity level and the application of the SFDR and taxonomy-related disclosure rules to financial products in various scenarios.

While the RTS are still under review by the European co-legislators and Financial Market Participants (FMPs) still face challenges in complying with the provisions of the SFDR, the EC has already given a clear signal that the RTS will most likely evolve, and FMPs are expected to secure additional efforts and resources to accommodate the additional requirements.

The SFDR Implementation Guide prepared by Stibbe Avocats and published in March 2021 is being modified to reflect the latest developments in the SFDR and will be submitted to the ABBL, ALFI and ACA for review before being shared with their respective members.