Sustainable Finance Disclosure Regulations (SFDR) – No Exemption for Firms With Less Than Three Employees
Tue Mar 9 2021
As you are aware the Sustainable Finance Disclosure Regulations applies from 10 March to:
- 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
Affected members should note that the Department of Finance has today advised they have decided to invoke the 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 has decided to delay the application of the requirements for a period of one year.
Therefore, from tomorrow, insurance intermediaries who employ 3 staff or more 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 will 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) have only so far published draft RTSs on the content, methodologies and presentation of disclosures under the SFDR. The European Commission is expected to endorse the RTS within three months of publication (4 February 2021) with the application date of the RTS currently being proposed for 1 January 2022. Brokers Ireland will keep members updated.
Meanwhile the links below may be of assistance:
- Link to the ESA press release in relation to recommendations on the application of the Regulation on sustainability-related disclosures (https://www.esma.europa.eu/press-news/esma-news/esas-issue-recommendations-application-regulation-sustainability-related)
- The Securities Markets Risk Report (February 2021) includes an item on the SFDR and the new regulatory changes and what is expected of firms (https://www.centralbank.ie/docs/default-source/Regulation/industry-market-sectors/securities-markets/risk-outlook-reports/securities-markets-risk-outlook-report-2021.pdf)
- Joint ESAs supervisory statement – SFDR has now been published (https://www.esma.europa.eu/document/joint-esas-supervisory-statement-sfdr)
For further enquiries, please email firstname.lastname@example.org
 Article 17 of the Regulations provides Member States with the discretion to exempt from the disclosure requirements, insurance intermediaries which provide advice on IBIPs, and investment firms which provide investment advice, provided that they employ fewer than three people (ie. two or less employees). The Department of Finance did not allow this exemption.
 Environmental, Social and Governance