BVI: European Commission's proposal to implement the disclosure regulation is pragmatic
- BVI criticism has had a positive effect
- European Commission to allow more time for implementation
The European Commission has announced that it will implement the rules on sustainability related disclosure requirements in a pragmatic way. ‘The statements of the European Commission enable fund companies to meet their future sustainability obligations without having to change the politically fixed start date of the Sustainable Finance Disclosure Regulation. They also prevent a threatened stop in sales of sustainable funds,’ says Thomas Richter, CEO of the German Investment Funds Association BVI.
The European Commission now wants to separate the entry into force of the provisions of the regulation from the upcoming technical regulatory details. Thus, the Sustainable Finance Disclosure Regulation (SFDR) is to start unchanged on 10 March 2021 on the principle-based requirements defined in the text of the regulation. The regulatory technical standards with the detailed requirements will enter into force at a later date – probably from the beginning of 2022. ‘This will give the fund companies and national authorities the necessary time to implement the sustainability related disclosure obligations,’ says Richter. Fund companies have to take sustainability risks into account already and, in the case of products with sustainability features, inform about the approach used in each case, for example in the sales prospectus. This should be sufficient for compliance with the principle-based requirements of the regulation. For the disclosure, likewise required, of material adverse sustainability impacts, fund companies may, for example, use information that they already publish as part of non-financial reporting or in accordance with other international standards.
According to the current timetable for the application of the SFDR, funds would have had not only to include the principles-based requirements of the regulation but also detailed information on sustainability in their sales prospectuses from the date the SFDR was to enter into force on 10 March 2021. However, the corresponding templates are still being developed by the European Supervisory Authorities and are not even available in draft form. They will be available in their final versions at the end of January 2021 at the earliest. This would have left fund companies only five weeks to analyse the new requirements and adapt the investor information of thousands of funds. This would have been practically impossible. Consequently, the distribution of sustainable funds would not have been possible from 10 March 2021 onwards, as they could not have implemented the requirements for detailed sustainable information. For this reason, the BVI has in recent months been strongly advocating realistic requirements for the start of the disclosure regulation.