As most of the provisions on sustainability-related disclosures laid down in the SFDR have started applying from 10 March 2021 and the product-related taxonomy disclosures apply for financial products with respect to the climate change mitigation and climate change adaptation from 1 January 2022, single rulebook on taxonomy disclosures has been established (although on a temporary basis).

It is regrettable that, on account of legislative delays, once more supervisory authorities replace in this role authorised legislative bodies.

 

What bothers me most this spring - from regulatory point od view - is all shades of green. 

Green finance inevitably strives to be prominent part of the corporate reporting statements and termsheets.

 

The final delegated acts are still in the construction phase, nevertheless, according to the supervisors, they have to be applied instantaneously.

Hence, this is the last minut occasion to go through the relevant definitions and master new terminology - which seems quite complex, by the way.

 

The differentiation between dark green products and light green products is a good point to start with.

 

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Explanatory Memorandum to Commission Delegated Regulation supplementing Regulation (EU) 2019/2088 of 6 April 2022 of the European Parliament and of the Council with regard to regulatory technical standards specifying the details of the content and presentation of the information in relation to the principle of ‘do no significant harm’, specifying the content, methodologies and presentation of information in relation to sustainability indicators and adverse sustainability impacts, and the content and presentation of the information in relation to the promotion of environmental or social characteristics and sustainable investment objectives in pre-contractual documents, on websites and in periodic reports adopted by the European Commission reads:

 

“Financial products that claim to pursue the objective of ‘sustainable investments’, with no significant harm, as defined in Article 2, point (17), of the Sustainable Finance Disclosures Regulation must be accompanied by the disclosures provided for in Article 9 of that Regulation. Financial products that promote ‘environmental or social characteristics’ – but not necessarily make in part ‘sustainable investments’ with no significant harm – must be accompanied by the disclosures provided for in Article 8 of the Sustainable Finance Disclosures Regulation”.


European Supervisory Authorities in the Joint Statement of 24 March 2022 on the application of the Sustainable Finance Disclosure Regulation (JC 2022 12) underline that the delay in the application of the Regulatory Technical Standards (RTS) has no impact on the application of the Taxonomy Regulation provisions.

 

Therefore, the taxonomy-alignment related product disclosures (as specified in Articles 8(2a) and 9(4a) SFDR) apply in respect of climate change mitigation and climate change adaptation from 1 January 2022 according to Article 27(2)(a) of the Taxonomy Regulation.

 

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 Taxonomy Regulation (the description of ‘to what extent’ the investments underlying the financial product are in economic activities that qualify as environmentally sustainable in Article 3 the Taxonomy Regulation), 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;

 

  • information on taxonomy-eligible activities should not be provided for the disclosure of the extent to which investments underlying the financial product are in taxonomy-aligned economic activities.

 

Moreover, while estimates should not be used, where information is not readily available from public disclosures by investee companies, financial market participants may rely on equivalent information on taxonomy alignment obtained directly from investee companies or from third party providers.

 

Until the application of the RTS, the numerical disclosure referred to above 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, for example by identifying the sources of information for that determination.

 

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 of the Taxonomy Regulation.

 

The supervisory authorities also mentioned:
“In addition to the reference to the above supervisory expectations for the sake of applying the provisions of the SFDR without the RTS during the interim period, national competent authorities are encouraged to refer financial market participants and financial advisers to the requirements set out in the draft RTS of the final reports that have been submitted to the European Commission on 4 February and 22 October 20217. The draft RTS submitted to the European Commission on 4 February and 22 October 2021 can be used as a reference for the purposes of applying the provisions of Articles 2a, 4, 8, 9, 10 and 11 of the SFDR and Article 5 and 6 of the TR in the interim period”.

 

Hence, we have the rulebook - although temporary only.

                                                                                                                         info                                

 

 


Important update
 

On 6 April 2022 the Commission Delegated Regulation supplementing Regulation (EU) 2019/2088 of the European Parliament and of the Council with regard to regulatory technical standards specifying the details of the content and presentation of the information in relation to the principle of ‘do no significant harm’, specifying the content, methodologies and presentation of information in relation to sustainability indicators and adverse sustainability impacts, and the content and presentation of the information in relation to the promotion of environmental or social characteristics and sustainable investment objectives in pre-contractual documents, on websites and in periodic reports has been adopted by the European Commission.
 

 

 


 

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