ESAs issue updated supervisory statement on application of SFDR

Written by Adam Cadle

25/03/2022

The three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) have updated their joint supervisory statement on the application of the Sustainable Finance Disclosure Regulation (SFDR), including a new timeline, expectations about the explicit quantification of the product disclosures under Article 5 and 6 of the taxonomy regulation, and the use of estimates.

The supervisory statement aims to promote an effective and consistent application and national supervision of the SFDR, this creating a level playing field and protecting investors. The ESAs recommend that national competent authorities and market participants use the current interim period from 10 March 2021 until 1 January 2023 to prepare for the application of the forthcoming Commission Delegated Regulation containing the Regulatory Technical Standards (RTS) while also applying the relevant measures of SFDR and the taxonomy regulation according to the relevant application dates outlined in the supervisory statement.

The ESAs clarify that, under Article 5 and 6 of the taxonomy regulation, the supervisory expectation for disclosures during the interim period is that financial market participants should provide an explicit quantification, through the numerical disclosure of the percentage, of the extent to which investments underlying the financial product are taxonomy-aligned.

In addition, the ESA’s said while estimates should not be used, where information is not readily available from investee companies’ public disclosures, financial market participants may rely on equivalent information on taxonomy-alignment obtained directly from investee companies or from third party providers.

This updated statement replaces the initial joint supervisory statement, which was released in February 2021.

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