The European Commission Delegated Regulation (EU) 2022/1288 of 6 April 2022 was finally published in the Official Journal of the European Union dated 25 July 2022 (hereinafter the “Delegated Regulation“).
This text, which is eagerly awaited by the professionals concerned [1], complements the Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector (“SFDR”) through the integration of regulatory technical standards. The draft standards had previously been submitted to the European Commission by the European Supervisory Authorities[2].
The main objective of the Delegated Regulation is to ensure that sustainability disclosures in the financial services sector are sufficiently clear, concise and visible to enable end investors to make informed decisions based on reliable data. Investors interested in the sustainability performance of relevant financial market participants and financial advisers are looking for comprehensive information covering both direct and indirect investments in assets.
One of the key challenges remains that this information must be easily comparable and easily understandable by investors, regardless of the Member State of the European Union in which they reside.
As a reminder, a delegated regulation is the equivalent of a regulatory act and it complies with the principles set out in the main regulation or directive, explaining the more operational nature of the provisions it contains.
In concrete terms, the Delegated Regulation includes:
- in its Annex I, a reporting template for financial market participants indicating that they take into account the principal adverse impacts of their investment decisions on sustainability factors. As a reminder, these stakeholders must, by 30 June of each year at the latest, publish a specific section on their website entitled “Statement on the principal adverse impacts of investment decisions on sustainability factors”, certain information specified in the SFDR and the Delegated Regulation. The Delegated Regulation also details the information to be included in the template. Moreover, the Delegated Regulation specifically lists the reportings to be made by financial market participants when they indicate that they do not take into account the negative impact of investment decisions on sustainability factors;
- a clarification of the statements made by financial advisors when they indicate that they take into account the main negative impacts on sustainability factors in their investment or insurance advice;
- in its Annex II, the pre-contractual information template for the financial products referred to in Article 8(1), (2) and (2a) of the SFDR and the first paragraph of Article 6 of Regulation (EU) 2020/852 (i.e. financial products promoting, among other characteristics, environmental or social characteristics, or a combination of those characteristics). These pre-contractual documents and information vary depending on the type of financial market participants (e.g. in the prospectuses for UCITS management companies). For example, the Delegated Regulation specifies the methods for calculating the extent to which investments are investments in environmentally sustainable economic activities;
- in its Annex III, the pre-contractual information template for financial products referred to in Article 9(1) to (4a) of the SFDR and the first paragraph of Article 5 of Regulation (EU) 2020/852 (i.e. financial products with the objective of sustainable investment and an index has been designated as the benchmark). This pre-contractual information is identical to the above-mentioned information linked to Annex II;
- details on how product information on products (i.e. those that promote environmental or social characteristics or that aim at sustainable investment) is to be published on the websites of the relevant financial market participants (i.e. details of the information to be included in a separate section entitled “Sustainability disclosures” of the website);
- in its Annex IV, the periodic reporting template for the financial products referred to in Article 8(1), (2) and (2a) of the SFDR and the first paragraph of Article 6 of Regulation (EU) 2020/852. This periodic information depends on the type of financial market participants (e.g. annual fund reports for AIF managers and UCITS management companies);
- in its Annex V, the periodic reporting template for the financial products referred to in Article 9(1) to (4a) of the SFDR and the first paragraph of Article 5 of Regulation (EU) 2020/852. This periodic information is identical to that mentioned above related to Annex IV of the Delegated Regulation;
- details on the historical comparisons of the information mentioned in the above-mentioned periodic reports as well as on financial products with investment options.
The provisions of the Delegated Regulation will enter into force on 1 January 2023. In this context and given the degree of precision expected regarding the content, methods and presentation of the information referred to in the Delegated Regulation, we strongly recommend that the relevant stakeholders anticipate this regulatory deadline.
[1]On the one hand, insurance undertakings offering insurance-based investment products, investment firms providing portfolio management services, institutions for occupational retirement provision, pension product originators, AIFMs, providers of pan-European personal pension products, managers of qualifying venture capital funds, managers of qualifying social entrepreneurship funds, UCITS management companies and credit institutions providing portfolio management services; on the other hand, insurance intermediaries and insurance undertakings that provide insurance advice relating to insurance-based investment products; and credit institutions, investment firms, AIFMs and UCITS management companies that provide investment advice.
[2]The European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority.