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    Another Delay for SFDR Level 2

    Stockholm (NordSIP) – Those waiting for more details and increased regulatory clarity regarding the Sustainable Finance Disclosure Regulation (SFDR) will have to curb their curiosity once again. On November 25, the European Commission published a letter sent to the European Parliament and the EU Council, announcing that the second part of the SFDR will likely be delayed by another six months and adopted from January 1, 2023. According to the announcement, the delay is “due to the length and technical detail” of the 13 regulatory technical standards and aims “to facilitate the smooth implementation of the delegated act by product manufacturers, financial advisers and supervisors”.

    After almost three years of preparation, SFDR Level 1 went live in March, seeking to increase transparency about the integration of sustainability risks in the financial sector by requiring financial advisers and financial service providers to disclose both the intended positive sustainability effects and negative externalities. In practice, Level 1 of the regulation asks asset managers to categorise their EU domiciled funds into the remit of articles 6, 8 or 9 of SFRD.

    SFDR Level 2, which was already delayed once by six months until July 2022, is to introduce the regulatory technical standards (RTSs), which would help asset managers justify their fund categorisations through a series of both environmental and social principal adverse impact (PAI) disclosures. The three European Supervisory Authorities (ESAs) have also been busy drafting additional RTSs, which require asset managers with Article 8 and 9 funds under SFDR to disclose further their funds’ level of alignment with the Taxonomy. All 13 RTSs for both SFDR and taxonomy alignment are outlined in a final report, published by the ESAs last month.

    Hopefully, the new six-months delay will give the Commission more time to prepare for the complex disclosure requirements. In the meantime, asset managers are encouraged to use the ESAs’ draft RTSs to inform their categorisations.

    Photo by Erik Mclean on Unsplash

     

    Julia Axelsson, CAIA
    Julia Axelsson, CAIA
    Julia has accumulated experience in asset management for more than 20 years in Stockholm and Beijing, in portfolio management, asset allocation, fund selection and risk management. In December 2020, she completed a program in Sustainability Studies at the University of Linköping. Julia speaks Mandarin, Bulgarian, Hindi, Russian, Swedish, Urdu and English. She holds a Master in Indology from Sofia University and has completed studies in Economics at both Stockholm University and Stockholm School of Economics.

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