The three European Supervisory Authorities (ESAs) have recommended that the Delegated Regulation supplementing the Sustainable Finance Disclosure Regulation (SFDR) be amended to include new social indicators and new product disclosures.

Following feedback from its consultation paper in April, the three ESAs – the European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA) and European Securities and Markets Authority (ESMA) – have adjusted the draft RTS in several areas.

In particular, the ESA's final report amending the draft Regulatory Technical Standards (RTS) to the SFDR Delegated Regulation suggested streamlining the framework for the disclosure of principal adverse impacts of investment decisions on the environment and society.

Alongside this, the ESAs recommended introducing new product disclosures regarding greenhouse gas emissions reduction targets, along with further technical revisions to the SFDR Delegated Regulation.

These include improvements to the disclosures on how sustainable investments ‘do no significant harm’ to the environment and society, and simplification of the pre-contractual and periodic disclosure templates for financial products.

Other technical adjustments concerning the treatment of derivatives, the calculation of sustainable investments, and provisions for financial products with underlying investment options, were also suggested in the report.

The final report responds to a mandate sent by the European Commission in April 2022 to review several aspects of the operation of the SFDR Delegated Regulation, including the disclosures of principal adverse impacts (PAI) of investment decisions on sustainability factors and to introduce disclosure of financial products’ decarbonisation targets.

The European Commission will study the draft RTS and decide whether to endorse them within three months of today’s publication by the ESAs.

These draft RTS would be applied independently of the comprehensive assessment of SFDR announced by the European Commission in September 2023 and before changes resulting from that assessment would be introduced.

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