I. Context
Since 1 January 2022, the European funds industry is adapting to the EU Taxonomy, a classification tool to identify and qualify sustainable economic activities and investments. Under the Taxonomy Regulation[1], a large range of economic activities may qualify as “environmentally sustainable” to the extent that they comply, inter alia, with scientific criteria provided by delegated acts.
With the adoption of the Complementary Climate Delegated Act[2] by the European Parliament in July 2022, the environmentally sustainable economic activities aligned with the EU Taxonomy will include, under specific conditions, nuclear energy and fossil gas-related activities, as of 1 January 2023.
The definition of “environmentally sustainable economic activities” is relevant for investment fund managers, as they are required, under the provisions of the Sustainability Financial Disclosure Regulation (“SFDR”), to disclose the proportion of alignment of their funds’ portfolio with the EU Taxonomy. The presentation and content of such disclosure is governed by the regulatory technical standards of SFDR (the “RTS”), published on 25 July 2022, which contain namely a graphical representation of the proportion of environmentally sustainable investments included in the mandatory templates.
On 8 April 2022, the European Commission (the “EC”) requested the European Supervisory Authorities (together referred as the “ESAs”) to suggest amendments to the SFDR regulation in line with the provisions of the Complementary Climate Delegated Act, which had just been approved by the EC.
Three months before the entry into force of the RTS, the ESAs published, on 30 September 2022, the updated RTS to include disclosures on gas and nuclear energy-related investments, which would meet the EU Taxonomy criteria.
II. Key elements of the revised RTS
- Amended templates
- ticking a yes/no box regarding investments made in fossil gas and/or nuclear energy-related activities complying with the EU Taxonomy; and
- to the extent that “yes” is ticked, the graphical representation of the EU Taxonomy alignment must include the proportion of investments in fossil gas and/or nuclear-related activities. It is clarified by the ESAs that if the product does not intend to invest in such activities, the breakdown is not required, and the graphical representation of the taxonomy-aligned investments already published in the current version of the RTS should instead be used.
- With the aim of enhancing transparency regarding the taxonomy-aligned gas and nuclear-related investments, the ESAs suggest amending the RTS by, namely, introducing a new provision to the pre-contractual and periodic report templates for Article 8 and Article 9 funds. The new provision consists in:
- Minor technical corrections to the RTS
- The ESAs take the opportunity to correct minor technical errors in the RTS and suggest deleting the pre-condition of making “sustainable investments” for disclosing about the EU Taxonomy-alignment of an Article 8 fund, to be consistent with the EC latest Q&As[3] and correcting clerical and cross-reference mistakes.
- Entry into force of the revised RTS
The revised RTS are now under scrutiny by the EC, which may endorse them within three months of their publication. Since the provisions of the RTS and the Complementary Climate Delegated Act are both entering into force on 1 January 2023, the application of the revised RTS becomes quite urgent. In that context, the ESAs have left it to the EC to include the expected application date in the revised RTS.
In line with the content of the revised RTS, the investment fund managers who are intending to invest into taxonomy-aligned fossil gas and nuclear energy activities may have to change their SFDR disclosures in a short period of time to ensure compliance by 1 January 2023.
[1] Regulation (EU) 2020/852 of 18 June 2020 on the establishment of a framework to facilitate sustainable investment https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32020R0852&from=EN
[2] Commission Delegated Regulation (EU) 2022/1214 of 9 March 2022 as regards economic activities in certain energy sectors amending Delegated Regulation (EU) 2021/2178 as regards specific public disclosures for those economic activities https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32022R1214&from=EN
[3] Q&As 25 May 2022
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