On 12 April 2023, the ESAs published and invited consultation on an adapted draft RTS to the Sustainability Financial Disclosure Regulation (SFDR) in force since March 2021. The original RTS was issued on 6 April 2022 under Delegated Regulation (EU) 2022/1288 and has been legally effective since 1 January 2023. The draft RTS now being consulted aims to expand disclosure and clarify technical issues. From the perspective of the securitisation market, the draft RTS is of direct relevance to the buy side. In addition to investors, the draft RTS therefore indirectly affects originators and arrangers. Although securitisations as a financial product do not fall under the SFDR, investors in securitisation transactions (especially asset managers) do.
Already in May 2022, the ESAs addressed relevant aspects of the consistency of securitisations with the SFDR in the course of the consultation on sustainability disclosures related to STS securitisations. (see TSI kompakt of 2 May 2022).
Selected key elements
The draft RTS includes a number of details on the disclosure obligation under the SFDR:
- Revision and extension of the indicators for the disclosure of “Principle Adverse Impacts” (PAI): In particular, in order to achieve consistency between the legislation on sustainable investments as defined in the SFDR and sustainable economic activities as defined in the Taxonomy Regulation (EU) 2020/852, which has legal effect since January 2022, the ESAs propose adjustments to the PAI indicators. The proposals go as far as amending the SFDR itself.
- Technical specifications on applicable methodologies, metrics and appropriate presentation of PAI indicators: Here, the focus was laid on social indicators. In order to reduce the data requirements of market participants, the social PAI indicators should be more closely aligned with the Corporate Sustainability Reporting Directive (CSRD) and the associated draft European Sustainability Reporting Standards (ESRS). Nevertheless, the ESAs propose further PAI indicators that go beyond the ESRS available so far.
- Extensions in connection with greenhouse gas (GHG) emissions: The ESAs focus here on financial products that explicitly aim to reduce GHG emissions. To the extent that these are products based on, for example, investments in securitised mortgages, the ESAs’ questions may be relevant for market participants in the securitisation market.
In addition, the ESAs have taken the opportunity to implement further adjustments in the new draft RTS. Overall, the RTS has thus been comprehensively revised.
Further procedure
As usual, the consultation paper contains questions from the ESAs, with which the market opinion on the draft RTS is requested. These are summarised in a reply form, which is to be used for the feedback to the ESAs. The consultation period runs until 4 July 2023.