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SFDR and Taxonomy - ESAs publish final report and draft RTS

SFDR and Taxonomy - ESAs publish final report and draft RTS

Overview

On 22 October 2021, the European Supervisory Authorities (ESAs) published their final report and draft regulatory technical standards (RTS) regarding the content and presentation of taxonomy related disclosures as required by the Taxonomy Regulation and the Sustainable Finance Disclosure Regulation (SFDR).

At the time of writing, it is not known when the Commission will publish the final RTS, whether it will differ from the version published by the ESAs, and ultimately when this will become settled law.

Since the ESAs published a draft RTS in March, it has been clear that the ESAs take the view that an Environmental Article 8 SFDR fund which does not commit to make any sustainable investments (i.e. an Article 8 "light green" fund) does not need to make Taxonomy-related pre-contractual and periodic disclosures.  It was not clear then and remains unclear now whether the Commission agrees with this approach.

Not having to make Taxonomy disclosures (and undertake the associated data capture) or, indeed, to categorise investments according to whether they qualified as "sustainable" under the SFDR definition, would create an important distinction between a light green Article 8 product (i.e. one that merely promotes environmental and/or social characteristics) and one with an Article 8+ (or "mid-green") classification because it has committed to make one or more "sustainable investments".

Although some of the drafting has changed, in our view, the final draft RTS has not meaningfully moved the position from the previous March draft in this respect.  It remains the case that we do not expect light green funds to be obliged to make detailed Taxonomy-related pre-contractual and periodic disclosures (though they will need to consider making brief Taxonomy-related clarificatory statements in active offering documents from 1 January 2022).  It is important to note, however, that this position could yet change when the Commission brings forward its proposal.

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