Are you losing sleep over SFDR disclosure requirements?
Background of the SFDR
The EU has been strengthening its sustainable finance regulations since 2017 in recognition of the role the financial sector can play in achieving the EU’s sustainable development objectives. The goal of these legislative efforts is to encourage the financial sector to support sustainable activities and to rotate capital away from harmful ones. The SFDR aims to create a level playing field where ESG and sustainability reporting criteria are concerned and to counter ‘greenwashing’.
SFDR Deadline: 30 June 2023
The SFDR came into effect in March 2021 and entered its Level 2 phase on 1 January 2023. SFDR Level 2 means that it is now mandatory for in-scope firms to implement the reporting templates (Principle Adverse Impact indicators), comply with the methodologies, and present the information under the SFDR disclosure requirement. Whereas previously in-scope firms had the opportunity to explain why they were not complying yet. Firms had until the end of June 2023 to disclose mandatory and additional PAI indicators in their PAI Statement covering the calendar year 2022. The PAI statement must be published on the firm’s webpage in a manner that is easily accessible, free of charge, not misleading, and easy to read.
In-scope or out of scope?
Even if your company is not directly in-scope for the SFDR, you may have investors to whom the SFDR does apply and these investors will require this information from you to meet their disclosure requirements.
Jesse Grift, co-founder of the Govin Governance Platform: “We hear a lot of uncertainty about the upcoming SFDR requirements. Some firms have started to investigate, some have not started at all. Many are not aware that the SFDR disclosure requirements could apply to investors in their company and that they will have to be able to provide the required ESG information to these investors.”
It should be obvious that you cannot afford to just sit back and adopt a wait-and-see attitude. You will have to take steps to find out which of your stakeholders require what type of ESG and sustainability information from your company and how you are going to provide this information. Because if you are unable to do so, you could be faced with difficulties in attracting and retaining investors to whom the SFDR applies. The future of your company may just depend on your ability to provide this information quickly and correctly.
What are the SFDR PAI indicators?
The mandatory SFDR reporting template outlines a set of indicators for the PAI statement, focusing on climate and environment-related adverse impacts as well as adverse social and governance impacts. These indicators are divided into a set of 14 core indicators and 31 additional indicators. In-scope firms should report on all 14 core indicators + 2 additional (at least one climate and environmental-related + one social and employee-related) indicators. The disclosure requirements are not limited to the PAI indicators, but also require firms to set up policies on the identification of principal adverse impacts, actions taken and plans to mitigate the principal adverse impacts.
SFDR reporting made easy with Govin
At Govin, we can help you identify which of your shareholders are in-scope for the SFDR and assist you with providing the relevant ESG and sustainability information that these shareholders require to fulfill their SFDR obligations. So don’t lose another night’s sleep over SFDR. Contact us at email@example.com we are here to help.