05.04.2022 Finance Luxembourg

Application of Regulations on sustainability-related disclosures and taxonomy regulations

The CSSF would like to bring to the attention of financial market participants and financial advisers  the Updated Supervisory Statement of the Joint Committee of the three European Supervisory Authorities (EBA, EIOPA and ESMA – hereinafter referred to as “ESAs”) on the application of Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (“SFDR”) and Article 5 and 6 of Regulation (EU) 2020/852 (Taxonomy Regulation, hereinafter referred to as “TR”) regarding the interim period until the application date of the Regulatory Technical Standards on the content, methodologies and presentation of sustainability-related disclosures (“RTS”). The Updated Supervisory Statement has been published on 25 March 2022.

SFDR and TR product disclosures entry into application without RTS

The ESAs remind that financial market participants and financial advisers are required to apply most of the provisions on sustainability-related disclosures laid down in the SFDR from 10 March 2021, while the application of the RTS is delayed to a later date. In that respect, the Commission announced in a letter1 on 25 November 2021 that the application date of the RTS would be delayed to 1 January 2023.

This delay in the application of the RTS has no impact either on the application of the amendments introduced by the TR to the SFDR. Therefore, the taxonomy-alignment related product disclosures apply in respect of the first two environmental objectives from 1 January 2022 according to Article 27(2)(a) of the TR.

Guidance during interim period

In line with the ESAs’ Updated Supervisory Statement, the CSSF encourages financial market participants and financial advisers to use the draft RTS2 as a reference for the purposes of applying the provisions of Articles 2a, 4, 8, 9, 10 and 11 of the SFDR and Articles 5 and 6 of the TR in the interim period until RTS are adopted by the European Commission.

The supervisory expectation during the interim period before the application of the RTS is that in order to comply with the provision under point (b) of the first subparagraph of Article 5 of the TR, an explicit quantification should be provided through the numerical disclosure as a percentage of the extent to which investments underlying the financial product are taxonomy-aligned. Until the application of the RTS, the numerical disclosure could be accompanied by a qualitative clarification explaining how the financial product addresses the determination of the proportion of taxonomy-aligned investments of the financial product. Such a clarification should be clear about the taxonomy-alignment of the investments underlying the financial product and should not disclose more information than what is required by Article 5 TR.

Application timeline for entity-level principal adverse impact statement

The ESAs detail in the Annex of its Updated Supervisory Statement the application timeline of specific provisions of the SFDR, the TR and the related RTS. The transitional arrangements foreseen by the ESAs for entity-level principal adverse impact (PAI) disclosures would no longer be relevant due to the delay of application of RTS. The first information relating to a reference period to be disclosed in accordance with the RTS should be made in a statement to be published by 30 June 2023 in respect of a reference period corresponding to the calendar year of 2022.

Source: CSSF