EU’s Sustainable Finance Disclosure Regulation(SFDR) is real, and it's time to crystalize what is expected of you – and when. It may be easier said than done, especially as the regulation has been delayed and processed multiple times. Are you still unsure of the key dates ahead and the new updates? Don’t look any further, we got everything covered! In this blog, we have summed up what are the next big happenings and what you have to do to comply in time.
30 June 2021: mandatory PAI statement
30 June 2021 marks one of the key dates for starting to apply to the Sustainable Finance Disclosure Regulation (SFDR). From this day, the “comply or explain” obligation becomes mandatory to comply for FMPs with more than 500 employees. This means that the asset managers (<500 employees) are obligated to publish and keep a statement on their website relating to their principal adverse impact and due diligence policies and how they plan to take action regarding the negative social impact and ecological footprint of their investments. This statement is often referred to as a “PAI Statement”, as its purpose is to cover the main principal adverse impacts of their investment decisions on sustainability and ESG factors.
What to Include?
The PAI statement is intended to gain transparency on the impact investment decisions that result in negative effects has on sustainability factors. Article 4 of SFDRdescribes sustainability factors as “climate and other environment-related impacts and adverse impacts in the field of social and employee matters, respect for human rights, anti-corruption and anti-bribery matters''. In addition, the statement must also include any already taken or planned action to combat these negative effects.
Firms are required to disclose:
Information about their policies on the identification and prioritization of principal adverse sustainability impacts and indicators
A description of the PAIs and taken or planned actions to manage them
Brief summaries of engagement policies with a reference to internationally recognized standards for due diligence and reporting and where relevant – the degree of their alignment with the Paris Agreement objectives.
The FMPs must report on the PAI latest on 30 June each year – with a reference period of the previous calendar year. This means that in 2023, you are to report on the reference period relating to 2022. As the disclosure regulation will start applying from 1 January 2022, the information provided is not expected to disclose on an earlier reference period.
Did you get the memo? Rescheduled reference periods (!)
Another important update is the rescheduling of the first reference period. Previously, the period ranged from 1 July 2021 until and including 31 December 2021. This meant that the FMPs were expected to report on the first reference period no later than 30 June 2022. However, in the final report of the draft Regulatory Technical Standards (RTS), the period has been postponed, ranging from 1 January 2022 until and including 31 December 2022. The rescheduled period of the first reference period is thus expected to be reported on 30 June 2023 instead.
Be that as it may – don’t postpone your compliance with the regulation! Collecting relevant data and reporting on sustainability is often more time-consuming than expected. So rather, take advantage of the extra time given and start as soon as possible. Want to smoothen up the process even further? Worldfavor’s Sustainability Management solution allocates all your data to regulations such as SFDR for you – so you barely have to lift a finger!
To round things up, mark your calendar with the following dates and subscribe to our blog to stay up-to-date on relevant SFDR updates and news.
30 June 2021: Latest date by which FMPs with more than 500 employees must publish and maintain a principal adverse impacts statement on their website. 1 January 2022: First reference period starts. This means that more detailed disclosure requirements must be reported in relation to the indicators of various disclosure, such as the PAI. 31 December 2022: First reference period ends; 1 January 2023: Second reference period starts. 30 June 2023: The final date on which FMPs need to report on their performance on the previous reference period for the first time, through the PAI Statement and other disclosures under SFDR. 31 December 2023: Second reference period ends 30 June 2024: The final date by which FMPs need to report for the second time. In addition, from this date onwards – they must start comparing between the first and second reference period.