The Sustainable Finance Disclosure Regulation (SFDR) applies to financial institutions including banks, insurers, asset managers and investment firms operating within the EU and requires these institutions to assess and publicly disclose certain information relating to environmental, social and governance matters.
SFDR aims to increase transparency on how financial market participants integrate sustainability into their investment decisions and recommendations. It introduces a classification system with new disclosure requirements for investment products. It focuses on investor protection and is designed to make it easier for investors to distinguish and compare products by classifying funds into three distinct categories according to the degree to which sustainability is a consideration.
The three European Supervisory Authorities (comprising the European Banking Authority (EBA), the European Insurance and Occupational Pension Authority (EIOPA) and the European Securities and Market Authority (ESMA)), recently updated their joint supervisory statement on the application of SFDR. This update includes a new timeline for the publication of the Regulatory Technical Standards (RTS) (delayed to 1 January 2023) and directs regulators and in scope financial institutions to use the current draft technical standards by way of guidance in order to comply with SFDR while recognising that the draft RTS may be subject to change.
The EU Taxonomy Regulation provides a classification system that helps financial institutions to identify sustainable economic activities and is connected to, and will support, disclosure requirements under SFDR. A useful summary of SFDR and the Taxonomy Regulation disclosure obligations is included in the updated Joint Supervisory Statement by the European Supervisory Authorities.
As Partner in EisnerAmper’s Governance, Risk & Compliance Group, Carina Myles advises financial service providers on risk, regulatory and compliance-related matters. EisnerAmper’s specialist services include:
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