Asset Management & Investment Funds: EU & International Developments – December 2023

ESAs propose amendments to sustainability disclosures for the financial sector.

The three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) published their Final Report amending the draft Regulatory Technical Standards (RTS) to the Delegated Regulation supplementing the Sustainable Finance Disclosure Regulation (SFDR level 2).

The ESAs propose:

  • adding new social indicators
  • streamlining the framework for the disclosure of principal adverse impacts of investment decisions on the environment and society
  • new product disclosures regarding “greenhouse gas emissions reduction” targets
  • further technical revisions to the SFDR Delegated Regulation:
    • improvements to the disclosures on how sustainable investments “Do No Significant Harm” (DNSH) to the environment and society
    • simplification of the pre-contractual and periodic disclosure templates for financial products
    • other technical adjustments concerning, among others, the treatment of derivatives, the calculation of sustainable investments, and provisions for financial products with underlying investment options

The European Commission will study the draft RTS and decide whether to endorse them within three months. These draft RTS would be applied independently of the comprehensive assessment of SFDR announced by the European Commission in September 2023 and before changes resulting from that assessment would be introduced.

On a related topic, you can read more about the European Commission targeted consultation on the implementation of the SFDR (which includes the potential introduction of a new sustainability product categorisation system) here.

ESAs update consolidated Q&As on PRIIPs KID

The ESAs published an updated set of consolidated Q&As on the PRIIPs KID.

A new Q&A in section XI on investment funds (page 57) clarifies that, in the case of an investment fund (UCITS or AIF), even if an investment fund (UCITS or AIF) delegates functions to third parties, the PRIIP manufacturer can only be the UCITS ManCo or AIFM of the fund or, in the case of a self-managed UCITS or internally managed AIF, the fund itself. The manufacturer of the PRIIP can not be an entity to which collective portfolio management functions, or other functions, have been delegated by the fund or by the UCITS ManCo or AIFM of the fund. Those entities to which functions could be delegated might, for example, be referred to as the fund promoter, sponsor, and so on. The answer was provided by the ESAs.

 Other sections of the Q&As updated on 5 December 2023 include:

  • general topics: product categories; performance scenarios
  • market risk assessment: product categories
  • performance scenarios
  • multi-option products (MOPs)

The ESAs last updated the Q&As on the PRIIPs KID in May 2023.

ESAs sustainable finance factsheet for consumers

The ESAs published an interactive factsheet for consumers considering buying financial products with sustainability features, including loans, investments, insurances and pensions.

The factsheet provides answers to frequently asked questions and steps consumers can take to understand how their financial choices could contribute to a more sustainable future. It also provides four tips which consumers could take into account before choosing financial products with sustainability features. Consumers are encouraged to:

  • decide how important sustainability is for them and what financial goals they want to achieve before they choose a product
  • pay attention to the conditions and the sustainability features, to avoid being misled by “greenwashing”
  • keep in mind that financial products with sustainability features are not risk-free
  • for investments and life insurance policies, take their time before deciding and, if need be, seek further clarification from the firm or person that can advise them on and sell them such products

The factsheet has pop-up boxes that explain certain terms and jargon.

Directive on financial services contracts concluded at a distance

The Directive on financial services contracts concluded at a distance will enter into force on 18 December 2023 (which is 20 days following its publication in the Official Journal) and will apply from 19 June 2026. Member states must adopt and publish, by 19 December 2025, the laws, regulations and administrative provisions necessary to implement the Directive.

You can read more here. Importantly, the right of withdrawal will not apply to units in collective investment undertakings.

For more information please contact a member of the Asset Management & Investment Funds team.

Date published: 12 December 2023