The European Fund Management and Asset Management Association (Efama) has called on European Union supervisors to delay the implementation of its sustainable finance reporting rules due to inconsistent reporting standards and concerns over the cost of data.
The Sustainable Finance Disclosure Regulation (SFDR) was introduced in March and requires asset managers to provide details on the sustainability credentials of their funds.
Regulatory technical standards (RTS) are due to be adopted by the third quarter and the disclosure requirements are set to go live from January 2022.
Dominik Hatiar, regulatory policy advisor at Efama, says, “If the amended RTS are adopted in Q3 2021, the timeline will not allow sufficient time to meet the new disclosure requirements ahead of the 1 January 2022 application date.”
“We urge the European Commission to provide for a transitional period in the first year of the taxonomy’s application to financial undertakings´ Level 2 disclosures, specifically Articles 5, 6 and 8 of the taxonomy.”
He adds, “A transitional application of the new taxonomy-related RTS amendments currently consulted on would also limit the number of times pre-contractual documents will need to be updated and lead to more clarity for the end-investors.”
Efama was responding to the joint European Supervisory Authorities (ESA) consultation on taxonomy-related sustainability disclosures.
The trade group said there are discrepancies between the taxonomy used in the SFDR and in other sustainability initiatives such as the portfolio greenness formula in the EU Ecolabel for retail financial products.
Under the current timeline, and considering recent taxonomy-related amendments to the SFDR RTS, the technical standards would not be endorsed as a single rulebook, stated Efama.
“On the contrary, it could result in two sets of RTS coming into force at different times, thereby confusing the market,” it added.
Efama argues that a transitional application of the amendments would limit the amount of paperwork and also provide more clarity for end-investors.
Efama also voiced concern about that the SFDR adversely affecting smaller asset managers because of high data costs.
It said, “Due to the market concentration amongst ESG data, research and ratings providers, there is a risk for exorbitant fees being charged by taxonomy data providers, leading to increased costs for end-investors. “
It added, “Higher costs would be detrimental for smaller asset managers and create barriers to entry for new players.”
In addition, Efama highlighted the challenges regarding assets not covered by the taxonomy, arguing that the Commission’s approach to non-assessable assets, such as sovereign bonds, cash or commodities needs to find a balance between the principles of comparability, conciseness, and relevance.
“While a mandatory inclusion of all assets might boost comparability, it will also significantly dilute the taxonomy alignment ratio and unduly penalise funds with high exposure to assets that have no chance of becoming taxonomy aligned,” according to EFAMA.
©Markets Media Europe 2021
[divider_to_top]
