Key takeaways
Earlier in 2023, the ESAs (the three European Supervisory Authorities - EBA, EIOPA, and ESMA) published a consultation to revise the Regulatory Technical Standards (RTS) of SFDR. And last week, news about a new RTS finally came to life. The ESAs published a draft of the new RTS with many important changes to the Principal Adverse Impacts statement and to the templates of the pre-contractual document and the periodic report.
It is noticeable that the overarching theme of this update is simplification.
“We at Datia welcomed these changes because they will result in further alignment with other EU regulations, mainly the CSRD”, says Nora Sandahl, Head of Sustainability at Datia.
The draft was submitted to the European Commission. The EC has three months (starting on December 4th) to review it, and potentially approve it.
If the new RTS is approved, the timeline for its implementation is still unclear. In other words, we are still waiting for a confirmation of whether the new RTS might affect the PAI statements expected to be published by June 30th, 2024.
Notice that, if approved, the new RTS will be applied independently of another initiative led by the European Commission - a comprehensive assessment of SFDR which was announced in September 2023.
Below, we are listing and explaining the main changes proposed by the new RTS:
Changes to Principal Adverse Impacts:
- New mandatory and optional PAIs with the goal of increasing attention to social indicators
- Adjustments in the wording and/or calculation methods of PAI indicators. This is especially beneficial because the exact formulas for every single PAI calculation are now documented in the new RTS
- Additional definitions of specific terms in line with the European Sustainability Reporting Standards (ESRS) and other relevant terminology with EU regulations
- Requirement to disclose which portion of the data is reported and which is estimated (currently, this is officially considered by ESMA as best practice)
Clarifications regarding the relation between PAIs and the “Do No Significant Harm” (DNSH) principle under SFDR:
- The management company responsible for the financial product will need to disclose, on the website, the thresholds or criteria used to identify whether a PAI indicator significantly harms sustainability objectives
- Any investments in EU Taxonomy-aligned economic activities should be considered sustainable investments in the sense of SFDR
Changes on the pre-contractual and periodic templates:
- The new RTS proposes a new structure and content to the pre-contractual document and periodic report, intending to simplify them
- Additional disclosure requirements for those financial products that claim to pursue the reduction of GHD emissions
- A new summary was added to the very beginning of the pre-contractual template to streamline the information for investors
Read the ESAs' announcement and the entire draft RTS.
How Datia can help
Datia enables Financial Market Participants of any size to incorporate PAI indicators in their investment strategies, and to craft complete PAI statements.
Here’s what Datia offers:
- PAI indicators from 36,000+ companies, 210,000+ funds, and 210+ sovereign nations (or use your own data)
- Transparent and traceable data (origin, reporting periods, and links to the sources)
- Automatic calculations based on portfolio snapshots, and following the latest Regulatory Technical Standards
- PAI statement ready to download in pdf or editable format, and in multiple languages
- PAI indicators automatically inserted into EET files of your financial products
Datia’s team is following the proposed changes to the RTS closely in other to make the necessary updates to the PAI indicators and the downloadable statement ahead of potential deadlines.
Learn more about Datia’s solution to assist Financial Market Participants with the PAI statement.
