EC Regulation Containing RTS Goes Official

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    Stockholm (NordSIP) – Earlier this year, on 6 April, the European Commission formally adopted the consolidated regulatory technical standards (RTS) to the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy Regulation. The European Parliament and Council have now had the chance to review the delegated regulation containing the RTS. On 25 July, the Commission published the final version in the Official Journal of the European Union.

    Financial market participants have so far only been required to comply with the main provisions of the SFDR and Taxonomy Regulation (i.e., the level 1 requirements) and not with the RTS, which had not been finalised and adopted until now. Publishing the finalised version of the RTS brings us one step closer to the need to implement them. The regulation comes into force on the twentieth day following its publication in the Official Journal of the EU. The rules will be applicable from 1 January 2023.

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    The aim of the regulation is to help financial practitioners to better disclose sustainability-related information. The RTS specify in some detail the content to be disclosed, the measurement methodologies to be used, and the way the information is to be presented to the public. Among other key areas covered by the regulation is that of disclosures related to principal adverse impact (PAI), admittedly one of the most challenging elements of SFDR. Other parts cover pre-contractual financial product disclosures, periodic financial product disclosures, taxonomy-related financial product disclosures, ‘do no significant harm’ (DNSH), etc.

    For those still scrambling to decipher the details of the regulatory framework, earlier this summer, the three European Supervisory Authorities (ESAs)[1]published a joint clarification statement, offering some useful guidance. ESA also promised that a more comprehensive set of formal Q&As on the practical application of sustainability disclosure rules is in the making.

    There is no doubt that many financial practitioners will be pouring over the publication and the clarifications provided by ESA in the coming months as we draw nearer to the application date.

    [1] The European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and  Markets Authority (ESMA), collectively known as the European Supervisory Authorities (ESAs)

    Image courtesy of Guillaume Perigois 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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