The European Commission has postponed the implementation of the Sustainable Investment Product Disclosure Regulation (SFDR) until 2023.

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by KnowESG
EU Delay SFDR to 2023

A Brief Summary

The European Commission has postponed the implementation of disclosure requirements under the Sustainable Finance Disclosure Regulation (SFDR) until January 2023. The rules will require asset managers and other investment product providers to clearly label their sustainable offerings.

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The European Commission has decided to postpone the implementation of the Sustainable Finance Disclosure Regulation (SFDR) disclosure requirements for sustainable investment products by financial market participants until January 2023, its second postponement, putting the rules into effect a year later than planned.

The postponement pertains to the implementation of the Regulatory Technical Standards (RTS) that supplement the SFDR, as well as disclosures to label items that make sustainable investments ('Article 8' or 'Article 9' branded products).

The RTS was deferred in order to "facilitate the smooth implementation of the delegated act by product manufacturers, financial advisers, and supervisors," according to a letter from John Berrigan, European Commission Deputy Director-General for Financial Stability, to the Council of the European Union.

The EU SFDR is part of the EU's Action Plan on Sustainable Growth Financing. The regulation establishes harmonized rules for financial market participants, such as investors and advisers, on transparency in terms of the integration of sustainability risks and the consideration of adverse sustainability impacts in their processes, as well as the provision of sustainability-related information with regard to financial products. Financial market players and asset owners must disclose how sustainability risks are included into their investment decisions, as well as evaluations of the potential impact of sustainability risks on financial product returns, according to the legislation.

The RTS includes guidelines for financial market participants and financial advisors to follow in order to align their products with their desired label, as well as requirements for them to disclose on their websites the major negative impacts that investment decisions have on sustainability factors, based on a list of indicators that includes climate and environmental issues, as well as social and employee issues, human rights, anti-corruption, and anti-bribery.

With the application of the RTS, prepared by Europe's three principal financial regulatory agencies, the European Supervisory Authorities (ESAs), initially scheduled for January 2022, the SFDR laws went into force in March 2021. The European Commission postponed implementation until July 2022 in order to consolidate all RTS into a single act. The decision to postpone implementation until 2023 was taken owing to the "length and technical intricacy" of the standards, which required "extra time in the adoption process," according to the latest letter.

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