Memo #
33083

EU ESG: Delay of SFDR RTS, Taxonomy, and UCITS/AIFMD/MiFID II Delegated Acts
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[33083]

February 2, 2021 TO: ESG Task Force
EU ESG Disclosure Regulation Working Group
EU Sustainable Finance Strategy Working Group
ICI Global Regulated Funds Committee RE: EU ESG: Delay of SFDR RTS, Taxonomy, and UCITS/AIFMD/MiFID II Delegated Acts

 

We understand that the European Commission is delaying final publication of a number of EU sustainable finance measures until end of March / beginning of April and intends to publish these measures together in a consolidated package, accompanied by an explanatory narrative document to clarify how the different measures fit together. The delay applies to the following:

  • Sustainable Finance Disclosure Regulation (SFDR) regulatory technical standards (RTS).[1] The European Supervisory Authorities (ESAs) were initially expected to send the level 2 RTS to the Commission by end of January for adoption. We are hearing the RTS will still have a list of “adverse impact” sustainability indicators, but the number of indicators will be closer to 15 than 30, and there is likely to be a stronger materiality component as opposed to the initial draft where each indicator was deemed to constitute a “principal” adverse impact on sustainability.
  • UCITS/AIFMD/MiFID II Delegated Acts (DAs).[2] The Commission was initially expected to adopt these DAs by the end of January, including amendments to require integration of sustainability risk in governance, risk management, and investment decision-making, as well as amendments impacting the distribution of ESG funds.
  • Taxonomy DAs with technical screening criteria.[3] The Commission had intended to adopt the final technical screening criteria this month for defining when an economic activity is green under the Taxonomy’s first two environmental objectives of climate change mitigation and adaption. The Commission is delaying the final adoption after receiving over 45,000 responses to its final consultation in December and in the face of significant remaining concerns from Member States. The Commission has asked the Platform on Sustainable Finance (PSF) to provide input, and the PSF is expected to organize a stakeholder event toward the end of February. 

In the interim, the Commission is expected to publish a guidance document related to the above measures. This follows the recent letter from the European Securities and Markets Authority (ESMA) and the other ESAs that asks the Commission for feedback on areas where the interpretation of SFDR is uncertain.[4]

Here is a quick update on expected timing for other forthcoming sustainable finance initiatives:

  • Renewed Sustainable Finance Action Plan.[5] The Commission is expected to publish its Renewed Sustainable Finance Action Plan after the rest of the level 2 measures mentioned above.
  • Review of the Non-Financial Reporting Directive (NFRD).[6] The Commission is still expected to publish the initial legislative proposal for the NFRD review around the end of Q1.
  • Sustainable corporate governance legislative proposal.[7] The Commission’s sustainable corporate governance proposal is also still expected to be published in Q2 this year.
  • EU Green Bond Standard. The Commission is similarly expected to publish a legislative proposal on an EU Green Bond Standard in Q2.

We will keep you posted as we hear anything further.

 

Linda M. French
Assistant Chief Counsel, ICI Global

Anna Driggs
Director and Associate Chief Counsel
ICI Global

 

endnotes

[1] For more details on anticipated upcoming developments related to SFDR, see ICI Memorandum No. 33039, available at https://www.ici.org/my_ici/memorandum/memo33039 (see attachment with compliance dates and links to the various requirements).

[2] See ICI Memorandum No. 32584, available at https://www.iciglobal.org/iciglobal/pubs/memos/ci.memo32584.global.

[3] See European Commission, EU taxonomy for sustainable activities, available at https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/eu-taxonomy-sustainable-activities_en.

[4] See ICI Memorandum No. 33047, available at https://www.iciglobal.org/iciglobal/pubs/memos/ci.memo33047.global.

[5] See ICI Memorandum No. 32602, available at https://www.iciglobal.org/iciglobal/pubs/memos/ci.memo32602.global.

[6] See ICI Memorandum No. 32524, available at https://www.iciglobal.org/iciglobal/pubs/memos/ci.memo32524.global.

[7] See ICI Memorandum No. 33078, available at https://www.iciglobal.org/iciglobal/pubs/memos/ci.memo33078.global.