On 26 July 2021, the European Commission published a Q&A clarifying the application and implementation of the Sustainable Finance Disclosures Regulation (SFDR). The Q&A was issued in response to the January 2021 ‘SFDR priority issues‘ letter from the European Supervisory Authorities’ (ESA) which set out a range of questions on the following aspects of the regime:
- application to non-EU and registered (sub-threshold) AIFMs;
- principal adverse impact (PAI) reporting requirements for parent entities of large groups;
- scope of Article 8 (light-green product) transparency rules and specifically the meaning of ‘promotion’ in that context;
- Article 9 (dark-green product) transparency rules; and
- application of transparency rules to portfolios and dedicated funds.
While publication of the Q&A has largely been welcomed, including by EFAMA (the European Fund and Asset Management Association), some of the Commission’s answers have raised additional operational and compliance issues for entities and products in scope of SFDR. As a result, in its letter to the Commission on 20 August 2021 highlighting various SFDR implementation concerns, EFAMA have requested further clarification of several of the answers and an opportunity to discuss these at an industry workshop with the Commission. The following summarises the clarifications provided in the Q&A and highlights potential consequent impacts and action items for those in scope of SFDR. Relevant further points of clarification as requested by EFAMA are also highlighted.