The Commission finally adopts the final version of RTS for the SFDR


The European Commission announced on 6 April 2022 that it has adopted the Regulatory Technical Standards (RTS) to be used by financial market participants when circulating sustainability-related information under Regulation (EU) 2019/2088 of 27 November 2019, known as SFDR, or the Sustainable Finance Disclosure Regulation.

The RTS approved for SFDR include:

  • The major text of the delegated act with all 13 RTS, together with a statement of reasons;

  • Appendix 1 – Template of reporting principal adverse impacts on sustainability;

  • Appendix 2 and Appendix 3 – Template of pre-contractual information for financial products (including UCITSand AIFs2) referred to in Articles 8 and 9 of SFDR;

  • Appendix 4 and Appendix 5 – Template of periodic information for financial products (including UCITS and AIFs) referred to in Articles 8 and 9 of SFDR.

What's next? The RTS now need to becarefully reviewed by the European Parliament and the Council. Once the final text has been approved, the RTS will be published in the Official Journal of the EU.

As we have seen, the RTS application date has been postponed several times.

The approved RTS are expected to be applied and effective from 1 January 2023.  But this date will not be final until confirmed by the European Parliament and the Council.

The version of the RTS approved by the Commission remains in line with the draft text published by the ESAs3 almost six months ago, on 22 October 2021. It appears that the questions raised by financial operators through their marketplace organisations had no real transformative impact on the final text of the RTS last October. But asset management companies and UCIasset managers are still faced with the same challenge of producing the quantified information requested by SFDR in 2023. Examples include an investment fund that has opted for a green classification (Art. 8 of SFDR) taking E, S and G4 criteria into account in its investment strategy and a fund that has chosen a dark-green classification (Art. 9 of SFDR) with a sustainable investment objective.

With the exception of asset managers who have developed or acquired expertise, know-how and tools in investments focused on sustainability and environmental aspects over a number of years, this may be more complicated for both financial market participants subject to SFDR and our national or European supervisory authorities. "Green" data, such as information on the "S" criterion of ESG, are still missing, hindering the calculation of KPIs5 and PAIs6. There is still no universal definition of sustainability either. Some managers prefer to turn to an interim solution for "internal DIY" reporting pending greater transparency on the market for data and valuation methods.

Unless otherwise stated, the figures from a Morningstar study from the end of September 2021 indicate that nearly 80% of the European UCI industry was classified under Article 6 of SFDR, i.e. not subject to SFDR reporting. In addition, to date, neither the CSSF7 nor the AMF8 has provided the number or list of UCIs having mentioned a green classification in their prospectus, a regulatory obligation that has applied for over a year (10 March 2021).

This figure has been changed significantly to clarify that around 34% of funds would be classified under at least Article 8 of SFDR. Undoubtedly, the complexity or diversity of the "green" regulations to be interpreted (SFDR, Taxonomy regulation, CSRD9, climate law or even TCFD10) and/or the cost of future SFDR reporting according to RTS models may also be a barrier for companies when considering the implementation of a green strategy for the UCIs they manage, be they UCITS or AIFs, namely alternative investment funds (private equity funds or real estate funds).

Secondly, the methodologies for assessing and interpreting ESG criteria are diverse and varied. There is no standard. This may prove problematic for supervisory authorities when controlling UCIs that have the same classification but produce different figures, making it impossible to establish comparisons. 

In a final SFDR aspect, if financial products are now obliged to be listed – from a regulatory perspective – as dark green, green or not green at all, is it appropriate to question the legitimacy of ESG labels for categorising a financial product? Is obtaining and publishing these labels still useful?

At Societe Generale Securities Services, we support our clients (investment funds/management companies/active managers) in particular through our regulatory monitoring and commercial assistance. We also provide a range of reporting services for traditional funds as well as alternative investment funds and private assets activities.

Jean-Pierre Gomez, Head of Public and Regulatory Affairs, SGSS Luxembourg

1 UCITS: Undertakings for Collective Investment in Transferable Securities
AIF: Alternative Investment Fund

3 ESA: European Supervisory Authority

4 ESG: environmental, social and governance

5 KPIs: Key Performance Indicators

6 PAIs: Principal Adverse Impacts

7 CSSF: Commission de Surveillance du Secteur Financier (CSSF): the Luxembourg financial regulatory authority supervises banks, credit institutions, insurance companies and other financial companies

8 AMF: Autorité des Marchés Financiers (France)

9 CSRD: Corporate Sustainability Reporting Directive

10 TCFD: Task Force on Climate-related Financial Disclosures