SFDR Update

On the 9th of September 2022, the European Securities and Markets Authority (ESMA) published the list of additional interpretation questions raised by the European Supervisory Authorities (ESAs) to the European Commission in relation to EU Regulation 2019/2088 on sustainability-related disclosures in the financial services sector (the “SFDR”).

Questions include:

• The definition of “sustainable investment” and how it applies to the general equity or debt of an investee company where investee companies only partly contribute to environmental or social objectives;
• Whether financial products that have an Article 9(3) objective of reduction in carbon emissions can be either products with a passive or active investment strategy;
• Whether an Article 8 product can promote a reduction in carbon emissions as a ‘characteristic’ as opposed to being required to have this as an ‘objective’ under Article 9(3);
• What “consideration” of principle adverse impact means;
• Clarification on the calculation of the 500-employee threshold; and
• The frequency of periodic disclosures in the context of MiFID management activities. 

The responses to the above queries will be significantly critical to firms that must comply with the Regulatory Technical Standards (“RTSs”) under the SFDR by the 1st of January 2023 which is the day the RTSs come into force.

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