The European Commission confirmed yesterday (8 July 2021) that it intends to delay the full implementation of the Sustainable Finance Disclosure Regulation (SFDR) by 6 months. While SFDR (Level 1) became effective on 10 March 2021, compliance was only on a high level principle-based perspective, the implementation date of the regulatory technical standards accompanying SFDR (Level 2 RTS) were deferred until 1 January 2022. The Level 2 RTS set out the granular specifications for the content, methodology and presentation of disclosures required by Level 1 SFDR requirements. The European Commission have now announced their intention to defer the implementation date of the Level 2 RTS further until 1 July 2022.
This is a welcome development and follows weeks of rumours suggesting a delay. If the 1 January 2022 effective date had been retained, it would have afforded asset managers with insufficient lead in time to prepare and finalise all pre-contractual disclosures (i.e. fund prospectus/offering documents) and the accompanying website disclosures. This process would have been further complicated if national competent authorities required prior approval of the SFDR prompted changes to fund prospectus in advance of such changes being formally adopted (e.g. UCITS or retail funds). This would have likely led to a divergence in the quality of sustainability-related disclosures, which is contrary to the principal objectives of SFDR, i.e. harmonisation, the promotion of a level playing field and the protection of EU investors. So the decision of the European Commission to defer the implementation of the Level 2 RTS is pragmatic under the circumstances.
The European Commission’s announcement did not expressly mention that it was also intending to defer the implementation of the Taxonomy Regulations. The Taxonomy Regulations are to be effective from 1 January 2022 albeit on a staggered basis – from either 1 January 2022 or 1 January 2023 depending on the Environmental Objective of the relevant financial product. However, as the public consultation on the Taxonomy Regulations RTS only concluded in May 2021, with a final report to be published by the ESAs for submission to the European Commission in July, it is likely that the accompanying Taxonomy Regulations RTS (which update the SFDR Level 2 RTS) will similarly be deferred.
We therefore plan to bundle all 13 RTS and standards in a single delegated act and defer the dates of application of 1 January 2022 by six months to 1 July 2022.