ESG: European Regulators Seek Clarification on the Application of the Sustainable Finance Disclosure Regulation | Akin Gump Strauss Hauer & Feld LLP

European monetary supervisory authorities have requested the European Fee to make clear key areas of ambiguity relating to the scope and utility of the Sustainable Finance Disclosure Regulation¹ (SFDR), together with its extraterritorial utility.

The Joint Committee of the European Supervisory Authorities (ESAs) answerable for drafting the regulatory technical requirements underneath the SFDR has written to the European Fee in search of readability on “a number of vital areas of uncertainty within the interpretation of SFDR.”²

The ESAs additionally search clarification about whether or not the SFDR applies to non-EU Various Funding Fund Managers (AIFM) when advertising underneath the nationwide non-public placement regime of Article 42 of the Various Funding Fund Managers Directive³ (AIFMD) within the EU. Particularly, the ESAs have sought readability about whether or not “SFDR applies to non-EU AIFMs, for instance once they market a sustainable EU Various Funding Fund underneath a Nationwide Non-public Placement Regime.” The ESAs state that readability is being sought from the European Fee for the next causes:

“SFDR applies to monetary market members and monetary advisers. Article 2(1)(e) SFDR defines ‘another funding fund supervisor (AIFM)’ as one of many monetary market members to which SFDR applies. An ‘AIFM’ is additional outlined in Article 2(4) SFDR as regards to Article 4(1)(b) of Directive 2011/61/EU (the Various Funding Fund Managers Directive (AIFMD)). Due to this fact, SFDR applies to AIFMs typically by advantage of the reference to Article 4(1)(b).”

In our earlier ESG alert of 25 November 2020, we mentioned the potential extraterritorial attain of the SFDR because of the broad drafting and sure steerage supplied by the European Fee within the context of the Taxonomy Regulation.

The ESAs have additionally said that, though “many of those interpretative uncertainties of SFDR could also be clarified in the end, the ESAs have recognized sure precedence questions pertaining to the SFDR that may profit from a extra pressing clarification to facilitate an orderly utility of SFDR from 10 March 2021.”

The 5 precedence areas recognized by the ESAs are:

1. The applying of SFDR to non-EU AIFMs and registered AIFMs
2. Utility of the 500-employee threshold for principal hostile affect reporting on dad or mum undertakings of a giant group
3. The that means of “promotion” within the context of merchandise selling environmental or social traits
4. The applying of Article 9 of SFDR
5. The applying of SFDR product guidelines to portfolios and devoted funds.

We set out in Annex 1 to this shopper alert the complete record of questions put to the European Fee by the ESAs.

The contribution of Andrea Gonzaga is gratefully acknowledged.

¹ Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐associated disclosures within the monetary providers sector (See here).

² Letter from Steven Maijoor to the European Fee on Precedence Points Regarding SFDR Utility, 7 January 2021 (See here).

³ Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Various Funding Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Laws (EC) No 1060/2009 and (EU) No 1095/2010 (See here).