The EACB warmly welcomes the opportunity to send its position on the amendments made to the SFDR RTS by way of the EU Taxonomy Regulation in order to further clarify sustainability disclosures. We also appreciate that the ESAs have been transparent on this process and are publically addressing stakeholders. We would thus like to express our support that the proposed approach of a single comprehensive set of SFDR RTS rather than separate draft RTS, is very much favoured by our members.
The EU co-legislators should in terms of transparency and fiduciary duties to the client, definitely avoid a situation where separate templates or multiple amendments to templates exist. The stakeholder responses to the July 2020 consultation on the SFDR RTS already showed that the industry considered the pre-contractual and periodic product templates too complex for clients. In addition, the two consumer testing exercises run by the ESAs for the draft RTS in the Netherlands and Poland showed that “a substantial number of respondents found the text complicated and hard to read. Another, quite large, portion of the respondents said that they had not been able to read the complete document, were not interested or simply did not know”. This issue will be further intensified with the addition of the current Taxonomy related amendments to the templates, especially if they are provided as a separate template instead of an integrated set.
That said, the proposed process accompanying the consolidated transparency approach is far from perfect and thus we can only see it working if certain timeline, sequencing and content issues are addressed as follows:-
• The Commission provides answers and legal certainty with respect to the various Level 1 issues still unclear to the industry (e.g. periodic reporting frequency of portfolio managers in line with financial market participants);
• All pending Taxonomy and SFDR RTS are adopted by the EU-co legislators within the required timelines that could allow sufficient implement time;
• However, in the case that the financial market participants will have less than 6 months to implement the SFDR RTS, then the Commission could endorse the ESAs safeguards in their supervisory statement, and also provide additional safeguards for further articles under the SFDR;
• Under normal circumstances, this implementation period would require at least 12 months for banks to be prepared. Considering the legal uncertainty and constantly changing content and timelines, banks cannot deploy the required large-scale (IT) capacity by 1 January 2022. We therefore consider it a reasonable and fair position that costly and limited (IT) capacity is only used once there is sufficient certainty about the obligations that will apply; and
• We also consider that a best-efforts transitional approach is expected in the first year (January to December 2022) of application of the SFDR RTS and the RTS under Articles 5, 6 and 8 of the Taxonomy. It would be confusing to investors/distributors and burdensome to manufacturers to apply the templates based on the first SFDR RTS (which are not yet endorsed by the EU co-legislators) and then these must be changed based on the Taxonomy related amendments. The use of templates should start only after the adoption of the comprehensive SFDR RTS.
For further specific feedback the articles under the proposed RTS and as per the content of the consultation paper, please download our consultation paper.