A Step Closer To SFDR Changes Under ESAs' Final Report

On 4 December 2023 the European Supervisory Authorities (the "ESAs") published their final report on updating the regulatory technical standards of the Sustainable Finance Disclosure Regulation ("SFDR Level 2").

The updates proposed will vary in impact depending on a fund's strategy, particularly impacting if there is any commitment to greenhouse gas emissions reduction or if there are any sustainable investments due to updates to the do no significant harm disclosures. For those asset managers automatically caught or opted into the entity-level principal adverse impact ("PAI") reporting regime, the updates to the PAIs will also be significant. Many of the updates to the PAI indicators and their formulae or metrics are to align with the EU's Corporate Sustainability Reporting Directive's European Sustainability Reporting Standards ("ESRS").