The European Commission will defer by six months the application date of detailed rules for requirements under the sustainable finance disclosure regulation (SFDR), according to a letter seen by IPE.
In the letter, John Berrigan, director general for the Commission’s financial services division, told the European Parliament and Council that the Commission had not been able to hit the deadline for adopting draft regulatory technical standards (RTS) submitted by the European Supervisory Authorities (ESAs) in February “given their length and technical detail, which requires additional time in the adoption process”.
These RTS set out the rules for pre-contractual, periodic and website sustainability-related disclosures by asset managers, pension funds, and others.
Separately, the ESAs are still working on the detailed rules for taxonomy-related disclosure requirements, which are supposed to amend the SFDR RTS from February.
In the letter, Berrigan said that “[d]ue to the length and technical detail of those regulatory technical standards, the late submissions to the Commission, and envisaged amendments, we deem it necessary to facilitate the smooth implementation of the standards by product manufacturers, financial advisers and supervisors”.
“We therefore plan to bundle all 13 of the regulatory technical standards in a single delegated act and defer the dates of application of 1 January 2022 by six months to 1 July 2022,” he added.
Once the Commission received the latest set of RTS due from the ESAs, it would “work intensively to ensure the earliest possible adoption of the rules”, Berrigan concluded.
A source in the pension fund industry told IPE that the delay was welcome, as there would be more time to implement the templates required under the SFDR.
However, he suggested November would likely be the earliest the full bundle of RTS could be made official, giving only seven months for implementation of the taxonomy-related disclosure rules.
At asset manager association Efama, Dominik Hatiar, regulatory policy advisor, said that although the industry had been anticipating the imminent endorsement of the SFDR RTS and preparing to implement the measures by the January 2022 deadline, “we commend the Commission’s decision to postpone the RTS and defer its application date by six months”.
“The 1 January 2022 application deadline was becoming increasingly unrealistic due to the continuous delay of the RTS adoption, the unanswered Level 1 legal interpretation challenges outlined in the ESA´s letter on the application of SFDR, and the amount of time required by our members´ legal and reporting teams to implement the new measures,” Hatiar added.
In January the ESAs wrote to the Commission to ask for clarification of certain questions with regard to the SFDR, such as the meaning of “promote” in the context of financial products promoting environmental or social characteristics (Article 8 products). The Commission has yet to respond, with Hatiar wondering if its answer would be integrated into the final RTS.
Berrigan’s letter, which is dated yesterday, comes after the Commission earlier this week published its new sustainable finance strategy – after a widely circulated leak last week – in which it said it would propose minimum sustainability criteria for financial products falling under Article 8, so-called ‘light green’ products, under the SFDR.
During an event on Twitter this week, a sustainable finance policy officer at the Commission indicated the proposal of minimum criteria for Article 8 products would happen via the RTS – some in the industry have been wondering if the criteria would be adopted by the end of next year as part of a possible review of the SFDR itself.
The Commission’s plan to propose minimum criteria comes amid concerns about inconsistencies in how the different product categories created by SFDR are being interpreted.