ESG: Commission’s new Q&As on interpreting the SFDR – a client note

On 14 April 2023, the European Commission published a series of answers on the interpretation of the SFDR.

The eight questions being answered are those which the European Supervisory Authorities (ESAs) submitted to the Commission on 9 September 2022. (See our summary of those questions here.)

These questions represented the biggest remaining significant "known unknowns" - where key SFDR interpretative questions had not yet been formally answered by EU regulators. 

We now have the Commission's opinions, some seven months later.

What do the Q&A cover?

In order of likely importance for the financial services industry, the questions cover:

• The definition of "sustainable investments"
• What it means to "consider" principal adverse impacts
• The definition of article 9(3) products which have an objective of the reduction in carbon emissions
• The timing of periodic reports for portfolio management services
• The 500 employee test for mandatory PAI compliance

Our client note summarises the Commission's answers and sets out our high-level reaction to them.