Petra Hielkema, chair of the joint committee of the European Supervisory Authorities (ESAs), has said that ”it will not be possible to meet the original deadline of 28 April 2023” to deliver the mandate to review the principal adverse impact indicators and financial product disclosures in the SFDR Delegated Regulation set forth by the European Commission.
In a letter addressed to John Berrigan, director general financial stability, financial services, and the Capital Markets Union for the Commission, Hielkema noted that the ESAs – which include the European Insurance and Occupational Pensions Association (EIOPA), European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) – are expected to deliver this mandate with a delay of up to six months.
ESAs have been asked to provide their input by 28 April 2023.
The mandate covers amendments to the existing rules in the SFDR Delegated Regulation and, therefore, the submission of these regulatory technical standards (RTS) is not subject to a deadline within the SFDR, Hielkema said in the letter.
“In this context, the ESAs understand that the requested delivery date reflects the importance of making improvements to the SFDR framework on a timely basis, as well as existing practices regarding the time needed to conduct a partial review,” she wrote.
However, the ESAs have ”identified significant challenges” to deliver the required input in the time requested, Hielkema said, adding that such challenges relate to the substantial number of technical components to the work under this mandate to deliver the desired changes to the SFDR Delegated Regulation and the need to seek input from a range of expert bodies or agencies as stated in the mandate.
Hielkema noted, though, the large number of expert bodies the ESAs are expected to consult is procedurally similar to having to conduct an additional period of stakeholder consultation. Additionally, there is the need to conduct the normal full three-month public consultation with all external stakeholders, given that a shorter period of public consultation is not considered to be justified in this case.
Additionally, the revision and extension of principal adverse impact (PAI) indicators covering inter alia their respective definitions, applicable methodologies, metrics and presentation is a substantial and technically demanding exercise.
“As part of this, the ESAs consider it important to develop a more objective basis to the ’Do Not Significantly Harm’ framework and to significantly expand on the social indicators,” she wrote.
Further technical developments are also relevant, for instance to specify the treatment of derivatives and to develop formulae for all PAI indicators, she continued.
“Furthermore, the ESAs would have liked to dedicate a more intensive focus to this work in the first six months of receiving this mandate, but this was not possible due to the need to urgently deliver the RTS on fossil gas and nuclear energy amendments by 30 September 2022 under the separate SFDR mandate you sent us on 8 April 2022,” Hielkema wrote, addressing Berrigan.
“Based on these factors, it will not be possible to meet the original deadline of 28 April 2023 as set in your mandate,” she concluded.
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