As of 10 March 2021, the SFDR will apply, which dictates disclosures to be made to end investors regarding the consideration of adverse sustainability impacts, in investment decisionâ€making and advisory processes as explained hereafter:
- SFDR has been initiated to support the EU sustainability effort and the Paris Agreement;
- SFDR applies to (regulated) market participants;
- Financial market participants include, amongst others, managers of AIFs, UCITS or EuVECA and EuSEF labelled funds;
- Also applicable to Investment Firms providing portfolio management or advise;
- SFDR, the Taxonomy Regulation and Delegated Acts provide substantial parameters with regards to disclosure of information on sustainability and social impact(s) of investments;
- Three levels defining intensity of requirements: (i) if sustainability is not taken into account, (ii) if sustainability is promoted and (iii) if a specific sustainability claim and investment objectives are at hand;
- Delegated acts are expected in 2021, which will impose additional complex requirements for sustainable investments;
- SFDRâ€™s disclosure requirements: (i) publish information on investment/sustainability policies and adverse sustainability impacts at entity and product level on the website, (ii) include in remuneration policies details on consistency with the integration of sustainability risks and (iii) include descriptions on sustainability risks in pre-contractual disclosures (such as a prospectus) and in periodic reports;
- If sustainability impact is not a relevant factor in the product or that is not part of the investment strategy or policy, an explicit prescribed notification to inform investors shall be published; and
- Time left to implement the requirements into the organisation is short, regulators like the Luxemburg CSSF and Dutch AFM already check compliance with the legal requirements upfront.
Van Campen Liem supports sustainable finance and assists many sustainable EU-funds and its managers. Please reach out to Bastiaan Bloemink or Marieke Spee for further information on these Regulations or a tailored advice relating to the relevance of such Regulations for your business.