On 12 April 2023, the three European Supervisory Authorities (the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA)) published a joint Consultation Paper setting out proposed amendments to the disclosure framework under Regulation (EU) 2019/2088 (the Sustainable Finance Disclosure Regulation or SFDR).

The ESAs are proposing changes to the SFDR Delegated Regulation, aimed at addressing issues that have emerged since the introduction of the SFDR. The proposed amendments include:

  • Extending the list of universal social indicators for the disclosure of the principal adverse impacts (PAI) of investment decisions on the environment and society, such as earnings from non-cooperative tax jurisdictions or interference in the formation of trade unions.
  • Refining the content of other indicators for adverse impacts and their respective definitions, applicable methodologies, formulae for calculation as well as the presentation of the share of information derived directly from investee companies, sovereigns, supranationals or real estate assets.
  • Adding product disclosures regarding decarbonisation targets, including intermediate targets, the level of ambition and how the target will be achieved.

Further technical revisions to the SFDR Delegated Regulation are also proposed, including:

  • Improving the disclosures on how sustainable investments ‘do not significantly harm’ the environment and society.
  • Simplifying pre-contractual and periodic disclosure templates for financial products.
  • Making other technical adjustments concerning, among others, the treatment of derivatives, the definition of equivalent information, and provisions for financial products with underlying investment options.

The proposals follow the Joint Committee of the ESAs’ mandate, received from the European Commission on 28 April 2022, to review and revise the regulatory technical standards laid down in the SFDR Delegated Regulation.

The deadline for comments on the Consultation Paper is 4 July 2023. After it considers the comments received, the ESAs plan to prepare a final report and submit it to the European Commission by the end of October 2023.