Sustainable Finance Disclosure Regulations – 10 March 2022
Wed Mar 2 2022
As you are aware the Sustainable Finance Disclosure Regulations applied to members with three or more employees from the 10 March 2021 who are :
- Insurance intermediaries who provide insurance advice with regard to IBIPs.
- Investment Intermediaries who provide investment advice (through providers such as Davy/BCP etc) to both retail and professional investors.
The rules apply to all financial products, including IBIPs, portfolio management, pension products and PEPPs, regardless of whether they are designed as “green” products with an ESG profile.
National Discretion – Members Who Employ Fewer Than Three People
Last year, the Department of Finance decided to invoke a discretion to apply the SFDR to financial advisers with less than three employees. However, in order to provide affected financial advisors with sufficient time to prepare, the Minister decided to delay the application of the requirements for a period of one year.
Therefore, from 10th March 2022 insurance intermediaries who employ 3 staff or less and provide advice on IBIPs, and investment firms that provide investment advice, are required to consider and factor in sustainability risks in their advisory processes, and to provide information in accordance with the SFDR, both at entity level (on their website) and at product level (at pre-contractual stage).
The SFDR introduces additional disclosure obligations for manufacturers of financial products and financial advisers toward end-investors. The Regulations require impacted firms to integrate sustainability into their investment processes and to consider the adverse impacts of their investments on sustainability factors. The Regulations apply regardless of whether the client has indicated an ESG preference or not.
Brokers Ireland previously provided guidance to members, which can be found in the Brokers Ireland Website – Members Area/Compliance Support/ Sustainable Finance Disclosure Regulation. The guidance provided is on a general basis.
Members can decide whether or not to consider adverse impacts of investment decisions on sustainability factors. However, if they decide not to consider the adverse impacts, they must prepare a disclosure outlining they are not considering the adverse impacts, and information on whether and when they intend to consider such impacts in the future.
The European Supervisory Authorities (ESAs) published level 2 requirements during 2021, which set out specifications for the content, methodology, and presentation of required disclosures. The European Commission has confirmed a six-month delay to the application date of SFDR Level 2 requirements from July 2022 until the 1st of January 2023.
Also, amendments were also made to the IDD which will require insurance intermediaries distributing IBIPs, and investment firms providing investment advice to ask questions to identify a customer’s individual sustainability preferences which come into effect in August 2022.
Brokers Ireland will issue updated guidance in advance of the commencement of the requirements.