Joint ESA supervisory statement provides guidance on SFDR application timelines

On 25 February 2021, the European Supervisory Authorities (“ESAs”) published a joint supervisory statement (the “ESA Statement”) providing guidance on the application of Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector, as amended (the “Sustainable Finance Disclosure Regulation” or “SFDR”).

The main objective of the ESA Statement is to provide further guidance on and ensure consistent application of sustainability-related disclosures in the so-called interim period between 10 March 2021 and 1 January 2022.

Delayed Level 2 RTS application date

Most so-called Level 1 provisions on sustainability-related disclosures laid down in the SFDR apply from 10 March 2021 onwards. However, the proposed application date for the draft level 2 Regulatory Technical Standards (“RTS”) has been delayed until 1 January 2022.

Compliance during the interim period

In their final report to the European Commission of 4 February 2021, the ESAs recommend that financial market participants and financial advisers apply the draft RTS, even though the RTS have yet to be finalised. The ESA Statement expressly refers to the draft RTS with respect to compliance with the following provisions of the SFDR:

Article 2a - Principle of “do no significant harm” (“DNSH”)
Article 4 - Transparency of adverse sustainability impacts at entity level
Article 8 - Transparency of the promotion of environmental or social characteristics in pre‐contractual disclosures
Article 9 - Transparency of sustainable investments in pre‐contractual disclosures
Article 10 - Transparency of the promotion of environmental or social characteristics and of sustainable investments on websites

The ESA Statement departs from the more principles-based approach endorsed by the European Commission in its letter announcing the interim period.

SFDR and Taxonomy Regulation application timelines

In an annex to the ESA Statement, the ESAs provide guidance on the timelines for application of specific provisions of the SFDR, Regulation (EU) 2020/852 (the “Taxonomy Regulation”) and related RTS.