Financial Services Regulation and Compliance - Investment Firms September 2023

European

2023 Joint ESAs Report on the extent of voluntary disclosure of principal adverse impacts under the Sustainable Finance Disclosure Regulation

On 28 September 2023, the European Supervisory Authorities (ESAs) published a joint report on the extent of voluntary disclosure of principal adverse impacts under the Sustainable Finance Disclosure Regulation (SFDR) and developed some recommendations to National Competent Authorities (NCAs) and the European Commission (the Commission).

The main finding from the report is that while there is significant variation in the extent of compliance with the disclosure requirements across jurisdictions, there was an overall improvement in the application of voluntary disclosures.

The report includes sections on recommendations for both NCAs and the Commission. For the Commission the report suggests that they consider other ways of introducing proportionality for Financial Market Participants (FMPs) as the 500-employee threshold may not be the best way to measure the extent to which investments may have adverse impacts on sustainability factors. The ESAs suggest replacing it with a threshold based on the size of the FMP’s investments.

For NCAs, the report includes examples of both optimal and suboptimal disclosures and recommendations for their ongoing supervisory actions. The report suggests that NCAs provide support to market participants and highlight common supervisory expectations, facilitate exchange with industry to raise awareness and best practices, and follow up with non-compliant market participants while considering whether to use enforcement tools.

For more information on these topics please contact any member of A&L Goodbody's Asset Management & Investment Funds team.

Date published: 25 October 2023