Updated: May 5
UK-based managers of funds and portfolio services may need to include ESG disclosures in their product literature from 10 March 2021 if their products:
are marketed into Europe, and
promote environmental, social or sustainable features.
Most of the substantive provisions of the EU's Regulation on Sustainability‐Related Disclosures in the Financial Services Sector (SFDR) apply from 10 March 2021.
While SFDR has not been onshored into the UK, if your products are being marketed into Europe, you may need to comply with the product-level disclosures which need to be placed in your pre-contractual literature and on your website.
There is still some uncertainty as to whether these provisions need to be followed for third-country products. In fact, the European Supervisory Authorities (ESAs) have asked this very question of the European Commission (EC) as the regulation itself contained insufficient clarity.
However, with only a matter of weeks to go and many lawyers and advisors in the space cautioning firms to comply ahead of the 1 March 2021 deadline, most firms are preparing to do so.
Currently, firms need only comply with the level 1 regulations (i.e. the SFDR regulation itself) which, broadly speaking, equates to sharing information about the methodology that will be used.
The regulatory technical standards (RTS) provide more detail on the content and presentation of the disclosures, however, there is a longer timeframe for complying with this.
The press release from the ESAs on 4 February confirmed that the EC is expected to endorse the RTS within three months. The draft RTS provides a useful steer for firms keen to understand how to provide the full disclosure, but it is unlikely that the RTS will apply before 1 January 2022.
Other related RTS will be drafted across 2021 and 2022. Other aspects of SFDR, such as the periodic reporting, will also apply from 2022.