Supervisory Statement on the application of the Sustainable Finance Disclosure Regulation


Date: 27 April 2022

On 24 March 2022, the three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) updated their joint supervisory statement on the application of the Sustainable Finance Disclosures Regulation (SFDR)


The ESAs recommend that National Competent Authorities (NCAs) and Financial Market Participants (FMPs) use the period between the application of the SFDR (10 March 2021) and the Regulatory Technical Standards (RTS) (1 January 2023) to prepare for the application of the RTS.  Until that date, the draft Level 2 RTS measures may be used as a reference point for the purposes of applying the disclosure obligations set down under the SFDR.  It should be noted that the draft RTS may, however, be subject to change.

Background- SFDR

 By way of reminder, the SFDR sets out sustainability disclosure requirements for a broad range of FMPs, financial advisers and financial products, which supplement existing disclosure rules. FMPs relate to all sectors, including, fund managers, pension providers, insurance-based investment product providers, MiFID investment firms providing investment advice and credit institutions. Financial advisers also include any insurance intermediaries providing insurance advice relating to investment based insurance products (IBIPs).

Supervisory Statement

Readers will recall that the ESAs previously issued a joint supervisory statement in February 2021 to address how firms can comply during the interim period between the application of the Level 1 Regulation and the Level 2 RTS.  This supervisory statement aims to promote an effective and consistent application and national supervision of the SFDR, thus creating a level playing field and protecting investors. 

The updated supervisory statement (which replaces the previous supervisory statement) sets out the new timeline.  It also clarifies that financial product disclosure obligations under Article 5 and 6 of the Taxonomy Regulation should include an “explicit quantification” of the extent to which investments underlying the financial product are taxonomy-aligned. It provides advice on the use of estimates and confirms that while estimates should not be used to calculate the taxonomy-alignment of in-scope financial products, where information is not readily available from investee companies’ public disclosures, FMPs may rely on equivalent information on taxonomy-alignment obtained directly from investee companies or from third party providers.