With Regulation 2019/2088 on SFDR now firmly embedded in industry practices, asset managers are once again having to face finalising funds’ annual reports, including SFDR periodic disclosures.
According to Zeidler Group, while most firms have grown accustomed to preparing pre-contractual disclosures and maintaining up-to-date website information, periodic disclosures introduce their own set of complexities. Unlike pre-contractual materials, these disclosures are retrospective, which require detailed quantitative data that reflect ESG performance over the reporting year.
Under the amended Commission Delegated Regulation (EU) 2022/1288, commonly referred to as the SFDR Delegated Regulation, funds falling under Article 8 and Article 9 are obliged to report annually on the environmental or social characteristics they promote, or their sustainable investment objectives. These disclosures must strictly adhere to predefined templates: Annex IV/III for Article 8 funds, and Annex V/IV for Article 9 funds.
For both UCITS and AIFs, the periodic disclosures must be appended to the annual report and comply with its deadlines. UCITS funds have four months after the year-end to submit these, while AIFs have six months. The content of the disclosures must cover how the fund met its stated ESG characteristics or objectives, and this includes data on principal adverse impacts (PAIs), alignment with the EU Taxonomy where relevant, and how the “do no significant harm” (DNSH) principle was fulfilled.
Despite the very highly structured nature of the templates, asset managers often encounter interpretative and operational challenges. These frequently stem from data gaps, confusion over the template requirements, or inconsistencies between periodic and pre-contractual disclosures. Common missteps include misaligned or outdated ESG data, overly generic language that fails to demonstrate regulatory compliance, missing information due to mid-year fund launches or strategy shifts, and the reuse of pre-contractual content that does not reflect actual ESG outcomes.
Periodic disclosures stand as a vital instrument for investor transparency. With rising regulatory scrutiny around data quality and EU Taxonomy compliance, it is essential for funds to ensure their reports are not only consistent but also evidence-based and detailed.
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