On 2 September 2020, the Financial Markets Law Committee (FMLC) published its response to the joint consultation paper that the European Supervisory Authorities (ESAs) published on 22 April 2020 dealing with proposed regulatory technical standards (RTS) under the Sustainable Finance Disclosure Regulation (SFDR).
The FMLC has submitted a response drawing attention to the divergence in relation to international standards on sustainability-related disclosure requirements, which creates uncertainty in relation to reporting obligations vis-à-vis cross-border investment activities. The FMLC also notes that there is also some divergence across EU law in relation to disclosure obligations set out under the SFDR, the Non-Financial Reporting Directive and the Taxonomy Regulation.
In addition, the FMLC notes that there are requirements in existing EU regimes such as those to disclose environmental or social objectives provided by Article 8 (3)(c)(ii) of the Regulation for packaged retail and insurance based investment products and under the principles to make “fair, clear and not misleading” disclosures under the UCITS Directive, the Alternative Investment Fund Managers Directive and the revised Markets in Financial Instruments Directive There is a risk that a new mandatory disclosure under the SFDR will cause confusion and overlap.
The FMLC urges the ESAs to ensure that the RTS are aligned closely to the objectives set out in the SFDR. In the future, when EU legislation in this area is reviewed, it would be beneficial for the objectives and requirements imposed on financial markets participants by each piece of legislation to be aligned with the others.