DISCLAIMER: This post was last modified on 10 May 2023. Some information in this article may not be updated.

The European Commission (“EC”) initially required financial products to report on ESG (Environmental, Social and Governance) matters under the Sustainable Finance Disclosure Regulation (“SFDR”), which states all products should integrate sustainability risks into an investment decision. It came into force on 9 December 2019, with the first disclosure requirements applied since 10 March 2021, known as “level 1”.

On 6 April 2022, the EC adopted the Regulatory Technical Standards(“RTS”) under “level 2” for SFDR, complementing the provisions of the Disclosure Regulation by providing detailed guidance on disclosures relating to principal adverse impacts(“PAIs”) on sustainability factors for the Financial Market Participants(“FMPs”). The PAI is a company’s statement on the potential harm that investment decisions may have on sustainability factors related to environmental, social and labour issues, respect for human rights and the fight against corruption and bribery.

In view of the above, FMPs will need to publish/disclose their first detailed entity-level PAI statement by 30 June 2023, as specified by the RTS. The initial PAI statement applies to all investment products (Articles 6, 8 and 9 under SFDR). It must cover the first reference period, 1 January 2022 to 31 December 2022, which means that FMPs should have started to collect the relevant data from 1 January 2022 based on pre-contractual and periodic disclosures on product-level PAI consideration. This will be an annual disclosure requirement.

Under SFDR, FMPs must include the required disclosures in the prospectus or Private Placement Memorandum (“PPM”), pre-contractual information, website and marketing materials.

Generally, Article 6 SFDR is the standard classification for products that do not have an ESG investment focus. These products do not have a sustainable investment objective or invest in assets with environmental or social benefits. Under this classification, FMP must explain why the FMP does not consider sustainability risk in its investment strategy. Article 8 and Article 9 FMPs will have additional disclosures and/or reporting requirements, such as taxonomy objectives.

It is important to note that the local regulator may be informed separately, so FMP should be aware of the local authority’s requirements.

Bolder Group can assist you with the required SFDR disclosures for articles 6, 8 and 9 and liaise with the local regulator.

Please do not hesitate to contact the undersigned should you have any questions.

Ana Prada, Bolder Group’s ESG Specialist

Amber de Haer, Bolder Group’s Head of Governance Netherlands

Nicolas Charbonnet, Bolder Group’s Head of Corporate Luxembourg

Bolder Group does not provide financial, tax or legal advice and the information contained herein is meant for general information purposes only. We strongly recommend that before acting on any of the information contained herein, readers should consult with their professional advisers. The Bolder Group accepts no liability for any errors or omissions in the information, or the consequences resulting from any action taken by a reader based on the information provided herein.

Bolder Group refers to the global network of independent subsidiaries of Bolder Group Holding BV. Bolder Group Holding BV provides no client services. Such services are provided solely by the independent companies within the Bolder Group which are each legally distinct and separate entities and have no authority (actual, apparent, implied or otherwise) to obligate or bind Bolder Group Holding BV in any manner whatsoever. The operations of the Bolder Group are conducted independently and have no affiliation with third party financial, tax or legal advisory firms or corporations.