On 4 December, the European Supervisory Authorities (ESAs) published their final report on the Regulatory Technical Standards (RTS) of the Delegated Regulation supplementing the Sustainable Finance Disclosure Regulation (SFDR). The final report is a revision of the draft RTS from April 2023 (see TSI kompakt of 17 April 2023). In it, the ESAs propose adding new social indicators and tightening the framework for disclosing the Principal Adverse Impacts (PAIs) of investment decisions on the environment and society. This includes improvements to the Do No Significant Harm (DNSH) disclosures under the Taxonomy Regulation. In addition, the ESAs propose technical changes, including a harmonised calculation of sustainable investments.
This RTS is a product-specific regulation in the context of the currently applicable SFDR (“SFDR 1.0”). As a financial product, securitisations are not directly within the scope of the SFDR. Nevertheless, this RTS is relevant for the securitisation market as it demonstrates the intention of the ESAs with regard to sustainability regulation in the securitisation market: Regulation is to be made more practical.
There are currently two interesting developments in context of the SFDR:
- Firstly, the regular review of the SFDR currently underway. Here, too, the focus is on product regulation. The consultation suggests that market participants are not utilising aspects of the SFDR (in particular Articles 8 and 9) as intended by the legislator. Some market participants therefore expect a comprehensive revision of the SFDR and the introduction of an “SFDR 2.0”.
- Secondly, the pending adoption of the final draft RTS on the disclosure of sustainability factors for STS securitisations: Following an initial consultation in May 2022 (see TSI kompakt of 2 May 2022), in which the TSI participated together with its stakeholders with a statement, the final draft of this RTS was published at the end of May 2023 (see TSI kompakt of 1 June 2023). However, contrary to standard legal practice, the European Commission has yet to adopt it.
The revision of the final draft RTS for SFDR 1.0, the discussion about a substantially more practical SFDR 2.0 and the fact that an RTS on the disclosure of sustainability factors for STS securitisations has not yet been adopted are fuelling hopes that the data requirements for sustainable securitisations will not go beyond the requirements for originators. This would be a positive development and a removal of barriers to the potential contribution of securitisations to financing the sustainable transformation. We will keep you up to date when SFDR and securitisations see again.