Gibson Dunn | Urgent Clarification Sought by European Supervisory Authorities on the Software of the Sustainable Finance Disclosure Regulation

January 21, 2021

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On 7 January 2021, the Joint Committee of the European Supervisory Authorities (“ESAs”) wrote to the European Fee, requesting “urgent” clarification on a number of critical locations of uncertainty in the application of Regulation (EU) 2019/2088 on sustainability-similar disclosures in the financial products and services sector (the “SFDR”) prior to the software of the vast majority of its specifications on 10 March 2021.

A person such location lifted, which will be of specific great importance to a quantity of fund professionals, is irrespective of whether the SFDR will implement to non-EU alternative expenditure fund professionals (“AIFMs”) when internet marketing cash in the EU under applicable nationwide non-public placement regimes.

Application to non-EU AIFMs

To date, the business has usually taken the look at that non-EU AIFMs will be caught by the product stage disclosure necessities of the SFDR, when marketing their money in the EU. This is generally as a consequence of the cross-reference in the SFDR to Article 4(1)(b) of the Substitute Investment decision Fund Professionals Directive (2011/61/EU), which alone features non-EU AIFMs.

The posing of this dilemma by the ESAs, on the other hand, casts doubt on the presumption by several non-EU AIFMs that they will fall within the scope of the SFDR. The marketplace will be viewing extremely carefully in the coming times and weeks to see how the European Commission responds. In the interim, this uncertainty obviously offers a problem for non-EU AIFMs, which will need to have to feel about no matter if to proceed with implementation for now, on the assumption that they will be caught, so as not to be on the “back foot” must the European Fee confirm they are inside scope.

Other crucial priority spots discovered

The ESAs have also asked for clarification in relation to a additional 4 locations (set out beneath at a superior degree):

  • software of the 500-employee threshold for principal adverse effects reporting on father or mother undertakings of a massive team – this is particularly substantial in light-weight of the reality that in which the threshold is met, from 30 June 2021, companies will have to look at adverse impacts of their investment decision choices on sustainability components (alternatively than use a “comply or explain” tactic)
  • the which means of “promotion” in the context of items promoting environmental or social attributes – the ESAs famous that, in common, clarification on the amount of ambition of the qualities by means of the provision of examples of distinct scenarios that are in, and outdoors, the scope of Article 8 of the SFDR would help with the orderly application of the SFDR. Fund supervisors will have to have to determine whether or not the fund falls in Article 8, as supplemental disclosure obligations implement wherever that is the case
  • the software of Write-up 9 of the SFDR – the ESAs asked for further clarification on what would represent an Write-up 9 products. For instance, they questioned whether or not a merchandise to which Article 9(1), (2) or (3) of the SFDR applies need to only invest in sustainable investments as defined in Article 2(17) of the SFDR. If not, is a minimum share of sustainable investments needed (or would there be a maximum restrict to the share of “other” investments)? As earlier mentioned, in relation to Write-up 8 solutions, fund professionals will have to have to make added disclosures if the fund in issue falls in Article 9 of the SFDR and
  • the software of the SFDR solution guidelines to portfolios and focused money – a person dilemma asked by the ESAs was no matter whether, for portfolios, or other styles of tailored economical products managed in accordance with mandates given by clients on a discretionary consumer-by-client foundation, the disclosure necessities in the SFDR utilize at the stage of the portfolio only or at the level of standardised portfolio solutions. This is plainly one more place in which further clarification from the European Commission would be very welcome.


It is, to say the the very least, significantly from ideal that there is so a great deal uncertainty encompassing the application of the SFDR so shut to 10 March. This is particularly the situation presented that these parts are by no signifies peripheral – there will, for occasion, be a significant range of non-EU AIFMs keeping their breath at the instant. The field will be waiting around with good fascination to see how the European Fee responds.

Gibson Dunn’s attorneys are out there to assist in addressing any thoughts you may well have about these developments.  If you would like to talk about any of the issues established out over – irrespective of whether problems raised or likely answers – be sure to call the Gibson Dunn British isles Monetary Providers Regulation staff:

Michelle M. Kirschner (+44 () 20 7071 4212, [email protected])

Martin Coombes (+44 () 20 7071 4258, [email protected])

Chris Hickey (+44 () 20 7071 4265, [email protected])

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