ESAs' Joint Consultation Paper on the review of SFDR Delegated Regulation

The ESAs have published a joint consultation paper on their review of the SFDR Delegated Regulation (i.e. SFDR level II). The proposed amendments include additional Principal Adverse Indicators (PAIs) and changes to the product-level disclosure templates.


On April 12 2023, the three European Supervisory Authorities (EBA, EIOPA and ESMA, together “the ESAs”) jointly published a consultation paper proposing changes to the Regulatory Technical Standards (RTS) as laid down in the SFDR Delegated Regulation (the “Consultation paper_”). The publication comes in response to the European Commission’s (EC) mandate to the ESAs in April 2022 to review the existing PAI regime, among other elements.

The purpose of the ESAs’ review is to extend and simplify sustainability disclosures, by addressing some of the issues that emerged since the implementation of the SFDR. As such, the Consultation paper goes beyond the EC’s mandate by including proposed amendments to the Do No Significant Harm (DNSH) disclosure regime, significant changes to the product-level disclosure templates and other technical adjustments.

Proposed amendments

As requested by the EC, the proposed changes entail:

  • An extension of the list of social indicators for PAIs, which includes four additional mandatory indicators, as well as supplementary opt-in indicators;

  • A refinement of the content of a number of the other indicators for adverse impacts and their respective definitions, applicable methodologies, metrics and presentation;

  • Amendments regarding greenhouse gas emissions reduction targets, including milestones, the level of ambition and the actions undertaken.

Additionally, the ESAs suggest:

  • Improving the disclosures on the DNSH test – the ESAs are of the opinion that currently, financial market participants are given too much discretion to consider PAIs in the DNSH test;

  • Simplifying the pre-contractual and periodic disclosure templates, as the current templates are often considered over complicated. Additionally, the ESAs want to further restrict the changes to the templates tolerated to ensure more consistency;

  • Making other technical adjustments on (i) the definition of equivalent information, (ii) the treatment of derivatives, and (iii) provisions for financial products with underlying investment options among others.

Next steps

The ESAs have set the deadline for comments on 4 July 2023. During the consultation period, the ESAs will organise a joint public hearing and targeted consumer testing.

In line with the instructions given by the EC to the ESAs, the final report is to be published by the end of October 2023, and thus any proposed amendments to the SFDR Delegated Regulation are not expected to enter into effect before 2024.

This update once again shows the fast-moving nature of the sustainable finance regulatory regime. Please, get in touch with your usual Arendt contact point to remain up to date or/and clarify any questions you may have.

Access the full Consultation paper here_


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