When SFDRs level 2 requirements take effect in January 2023, firms will need to provide more details explaining portfolio alignment with these categories. The information is provided as is and does not constitute legal advice or binding interpretations of the SFDR. SFDR requires that UCITS and AIFMs must designate investment products as an Article 6, 8 or 9 fund, and make certain disclosures in-keeping with this choice. Disclosures regarding sustainability are covered in Chapter 14. The new Sustainable Finance Disclosure Regulation 1 (SFDR) introduced various disclosure-related requirements for financial market participants and financial advisors at entity, service and product level. By 10 September 2022 and every year thereafter, the ESAs shall submit a report to the Commission on best practices and make recommendations towards voluntary reporting standards. 2. Article 8(3) specifies the publishing parameters of reporting both against the Taxonomy Regulation and the NFRD. Template pre-contractual disclosure for the financial products referred to in Article 8, paragraphs 1, 2 and 2a, of Regulation (EU) 2019/2088 and Article 6, first paragraph, of Regulation (EU) 2020/852. For further SFDR related fund/sub-fund level disclosures, please refer to the fund/ sub-fund specific Investment Objective and Policy section(s) and benchmark information in the prospectus that is available on the website. In line with the empowerment in Article 4(6) SFDR, the ESAs also sought input from the Joint Research Centre of the European Commission and the European Environment Agency as referred to in Article 4(6) SFDR. Asset managers are being cautious in their approach to classifying their funds as Article 8 or 9 under new EU legislation Sustainable Finance Disclosures Regulation (SFDR), but already some 2.5trn in European fund assets is estimated to sit under these categories and the number is expected to grow over the coming months. 18. 16the UN 17Global Compact , the OECD guide lines for multinational enterprises. Question Does Regulation (EU) 2019/2088 (SFDR) apply to non-EU Aug 4, 2022 DECISION 3/960/4.8.2022 of the Board of Directors_Amendment of Decision No. In 2023, in accordance with Article 10(4) of the Disclosures Delegated Act, large non- Draft Commission notice on the interpretation of certain legal provisions of the Taxonomy Regulation Article 8 Disclosures Delegated Act on the reporting of eligible economic activities and assets; Documents. around the approach for Article 6, 8 and 9 products under the EU Sustainable Finance Disclosure Regulation (SFDR). In this note, we will consider the enhanced set of requirements that apply to (1) AIFs that promote environmental or social characteristics ("Article 8 Funds/Light Green Funds") and (2) AIFs that have "sustainable (Article 8 of the SFDR). Article 8(4) of the Taxonomy Regulation requires the Commission to adopt a delegated act to specify the content, methodology, and presentation of information to be disclosed by both non-financial and financial undertakings by June 2021. The firm needs to feed the analysis into the SFDR disclosures by way of Articles 5 and 6 of the Taxonomy Regulation, which is the principal mechanism through which the regulation makes its presence felt in the world: In many respects, the Taxonomy can be regarded as a very elaborate set of marketing rules. The draft RTS relate to several disclosure obligations under the SFDR regarding the publication of: 19The German Sustainability Code (DNK) is an example of a national non- financial reporting standard. Specifically, that means that the reporting standards would include indicators that correspond to the indicators contained in the SFDR. This indicates stronger appetite for inflation-linked assets. Our SFDR methodologies and presentation of disclosures pursuant to Article 2a, Article 4(6) and (7), Article 8(3), Article 9(5), Joint ESAs Report on the extent of voluntary disclosure of principal adverse impact under the SFDR Report to the Commission under Article 18 of Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainabilityrelated disclosures in the financial services sector. 2 ESA: ESMA, EIOPA and EBA Question ID: Regulation reference: Regulation (EU) 2019/2088 on sustainabilityrelated disclosures in the financial services Topic: sustainable finance disclosures Article: point (4) of Article 2, Article 17, points (a), (d) and (e) of Articles 6(3) and points (a), (d) and (e) of Article 11(2) 1. Download Chapter 10. THEMES. Disclosures regarding sustainability are covered in Chapter 14. But this year, investors have increased their usage of alternatives (47% vs. 41% in 2021), real estate (27% vs. 24%) and particularly commodities (25% vs. 8%). SFDR ARTICLE 8 FUNDS SFDR ARTICLE 9 FUNDS Themes . These are detailed disclosures and must be made using the mandatory templates as set out in the SFDR RTS, which should be included as annexes to prospectuses and annual reports. MSCIs proposed approach to the key SFDR distinctions are based on assumptions and client feedback as explained in Article 8 Background. updated as companies issue new ESG disclosures and the SFDR develops new entity- and product-level specifications. The SFDR RTS set out the form and content of the pre-contractual and annual report disclosures that Article 8 and Article 9 funds must make. Analytical cookies help us improve our website by providing insight on how visitors interact with our site, and necessary cookies which the website needs to function properly. disclosures should be based on actual information provided by the financial or non-financial underlying investee entity or counterparty, in accordance with Article 8(4) second subparagraph of the Disclosures Delegated Act. Where a financial product as referred to in Article 8(1) of Regulation (EU) 2019/2088 promotes environmental characteristics, Article 5 of this Regulation shall apply mutatis mutandis. The European Supervisory Authorities (EBA, EIOPA and ESMA - ESAs) published today a survey seeking public feedback on presentational aspects of product templates, pursuant to Article 8(3), Article 9(5) and Article 11(4) of Regulation (EU) 2019/2088 on sustainabilityrelated disclosures in the financial services (SFDR). Product name: [complete] Legal entity identifier: Environmental and/or social characteristics . This website uses cookies. Download Chapter 10. Taxonomy Regulation; Final report on EU taxonomy; Technical annex to the final report on EU taxonomy; Factsheet: Financing sustainable growth In our Spring edition of Five by Five, we looked at the base set of requirements imposed by Articles 3 and 6 of the SFDR from the perspective of a non-EU AIFM. The information to be disclosed in accordance with Articles 6(3) and 11(2) of Regulation (EU) 2019/2088 shall be accompanied by the following statement: By Communiqu Communication to the investment fund industry on regulatory requirements in relation to Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (SFDR) and upcoming entry into force of SFDR Level 2 provisions (SFDR RTS), published on 27 July 2022, the CSSF reminded the deadline of 1 January 2023 for related Financial Disclosures (TCFD), 14. the United Nations (UN) Guiding Principles Reporting Framework , 15. Equities (80%) and bonds (58%) remain the most popular asset classes to gain exposure to ESG among global investors. However, definitions of Article 8 and 9 are quite broad. The disclosures to be made require a strategic positioning of all asset managers regarding their sustainable finance approaches as they will be required to be transparent about the following three topics: i) Sustainability risks, ii) Principle adverse impacts (PAI), and iii) ESG approach positioning. Any reference to ESG or impact goals, commitments, incentives, initiatives or outcomes in any statements or communications is not intended by Carlyle to be promoted as an environmental or social characteristic for the purposes of Article 8 of Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (SFDR), or a sustainable investment The ESAs shall take stock of the extent of voluntary disclosures in accordance with point (a) of Article 4(1) and point (a) of Article 7(1). and ISO 26000. These pre-contractual disclosures are required to ensure that investors have greater transparency before entering an investment product or accepting advice. Download here: Foundations for Growth 10-11 ILP Moneyfacts October 22 [] SRI Services and Partners annual event 6 October 2022 The main provisions of the SFDR have been applicable as of 10 March 2021, with a statutory instrument known as a Delegated Act containing more precise disclosure standards yet to be adopted by the European Commission. 1/808/07.02.2018 of the Board of Directors of the Hellenic Capital Market Commission "Organizational requirements regarding the safeguarding of client financial instruments and funds, product governance and the provision or reception of fees, The ESAs will also publish a consultation on taxonomy-related product disclosures under the Taxonomy Regulation which amends the empowerments in Articles 8(4), 9(6) and 11(5) of the SFDR. Even if SFDR Art. To give a sense of the significance of SFDR and why it is important to ensure it is being applied appropriately, according to Morningstar data, as of 31 March 2022, 31.5% of funds available for sale in the EU were classified as either Article 8 (27.9%) or Article 9 (3.6%). Eurobank Asset Management .. Where a financial market participant applies point (b) of Article 4(1), the disclosures referred to in Article 6(3) shall include for each financial product a statement that the financial market participant does not consider the adverse impacts of investment decisions on sustainability factors and the reasons therefor. FactSets universe consists of more than 7,000 public companies worldwide, including constituents from the Russell 1000, MSCI Europe, MSCI ACWI, MSCI World IMI, and other leading indices. The full, final article is linked below. The Taxonomy Regulation was published in the Official Journal on 22 June 2020. 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