Asset Management & Investment Funds: Irish Practice Developments – August 2023

CBI issues questionnaire: First phase of engagement in ESMA’s CSA on sustainability and risk disclosure

As outlined in our July 2023 AMIF bulletin, the ESMA Common Supervisory Action (CSA) on sustainability-related disclosures and the integration of sustainability risks is in progress and will run until Q3 2024. For the purposes of the CSA, the CBI has issued a questionnaire to several UCITS management companies and AIFMs, covering a range of funds within scope of Article 6, Article 8, and Article 9 SFDR. The selected fund managers will have until 12 September 2023 to complete the questionnaire.

The CBI’s questionnaire is part of a data collection exercise under the CSA for national competent authorities (NCAs) to share their findings with ESMA. Fund managers are expected to answer questions and provide relevant policies and procedures relating to:

  • The integration of sustainability risks and factors into their organisational requirements, including: human resources and the number of full-time equivalents (FTEs) dedicated to the integration of sustainability risk, or if this is not a FTE, the percentage of time dedicated to this, and what percentage of the total number of FTEs they represent; greenwashing risk; conflicts of interest; and risk management.
  • Entity level disclosures in relation to remuneration, principal adverse impacts (PAIs) of investment decisions on sustainability factors, and website disclosures.
  • Fund level disclosures, relating to ESG labels, net-zero commitments, and stakeholder engagement.
  • Fund names, pre-contractual and periodic reporting disclosures, including information on methods to establish criteria for ‘sustainable investments’ contribution and DNSH tests, and how PAI indicators are taken into account.

The CBI’s questionnaire points to likely areas of future regulatory focus and gives an indication of the areas in respect of which CSA findings are most likely to be made.

The preliminary findings on the identification of greenwashing risks at entity and product level, included in the CSA, will also provide input to ESMA’s final report on greenwashing due in May 2024. In June of this year, the European Supervisory Authorities (ESAs) published their progress reports on greenwashing in the financial sector. In its progress report, ESMA identifies areas as most exposed to greenwashing risks, as including, but not limited to, impact, present ESG performance, engagement, governance, ESG strategy and ESG credentials.

ELTIF developments

ELTIF 2.0 will apply from 10 January 2024. ELTIF 2.0 aims to boost the raising and channelling of capital towards long-term investments in the real economy, including towards investments that promote the European Green Deal and other priority areas, in line with the EU objective of smart, sustainable and inclusive growth.

  • The Central Bank of Ireland (CBI) is preparing a standalone ELTIF chapter for inclusion in the AIF Rulebook.
  • Consultation on the standalone ELTIF chapter is expected in October. The CBI is considering a shorter consultation period of approximately four to six weeks.
  • The proposal is that the ELTIF will be a standalone product and will not need to be separately authorised as a RIAIF or a QIAIF.
  • The authorisation process for an ELTIF will broadly follow the existing authorisation processes in place for RIAIFs and QIAIFs.
  • We expect that most of the amendments specific to the AIF Rulebook will concern supervisory and operational matters that currently apply to authorised Irish AIFs, such as expected disclosures and regulatory reporting, rather than product specific rules as these are already provided for directly in the ELTIF Regulation.
  • The CBI intends to publish the revised rulebook as quickly as possible which will facilitate the authorisation of ELTIFs under the ELTIF Regulation. The proposed standalone ELTIF chapter of the AIF Rulebook will set out rules for Irish ELTIFs which complement the requirements of the ELTIF Regulation.
  • It is hoped that the revised Rulebook will be in place when the Level 2 measures are in place. Once the revised AIF Rulebook is published, Irish ELTIFs can be authorised under the ELTIF 2.0 (2023 ELTIF Regulations) or ELTIF 1.0 (2015 ELTIF Regulations).
  • The CBI will engage with the industry as the ELTIF amendments to the AIF Rulebook progress.

Read more about ELTIF reforms in our March AMIF bulletin.

Irish Funds guidance paper on depositary oversight principles and ESG investment

The Irish Funds Depositary Working Group has produced a guidance paper recommending a set of principles that depositaries may consider in the discharge of their regulatory duties, as they relate to a fund’s ESG-related investment restrictions, investment policy and investment objective.

Read more here.

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

Date published: 6 September 2023