Europe: Welcome New Clarity on the Phasing in of EU ESG Disclosure Requirements

By: Philipp Riedl

Revised guidance from the European Supervisory Authorities (ESAs) contains much-needed information on the extent to which affected firms should be anticipating detailed Regulatory Technical Standards (RTS) that are not expected to be effective until 1 January 2023. The German regulator BaFin issued an accompanying statement on 30 March 2022. The key information is:

  • Application of Sustainable Finance Disclosure Regulation (SFDR) disclosure: Obliged market participants have been required to apply most of the provisions on sustainability-related disclosures laid down in the SFDR since 10 March 2021. Until 1 January 2023, the ESAs expect national authorities and, consequently, market participants to apply the disclosure requirements set out in the currently existing draft RTS (4 February and 22 October 2021). This includes the use of certain annexes. However, in Germany, whilst BaFin supports this approach, it will continue to accept disclosure based only on the principles of the SFDR.
  • PAI: The first entity-level „principal adverse sustainability impacts statements“ applying future RTS standards must be published by 30 June 2023 in respect of 2022.
  • Periodic disclosure: The details provided by the future RTS should be contained in periodic disclosures issued on or after 1 January 2023.
  • Application of Taxonomy Regulation disclosure: Disclosures relating to a relevant product’s taxonomy-alignment have applied in respect of the first two environmental objectives since 1 January 2022, despite the missing RTS. This includes the quantification (%) of the extent of taxonomy-aligned investments of Article 9 SFDR-classified funds. Estimates should not be used, but market participants may also rely on non-public information from portfolio companies or third party providers.

The future RTS may be proposed in spring and adopted in summer 2022.

Copyright © 2023, K&L Gates LLP. All Rights Reserved.