Disclosure requirements – Taxonomy Regulation
What is the EU Taxonomy Regulation?
The EU Taxonomy Regulation establishes a framework to classify environmentally sustainable economic activities and places additional disclosures on Funds that invest in economic activities that contribute particularly to one of the following six environmental objectives defined by the Taxonomy Regulation:
- Climate change mitigation
- Climate change adaptation
- Sustainable use and protection of water and marine resources
- Transition to a circular economy
- Pollution prevention and control
- Protection and restoration of biodiversity and ecosystems.
When do the EU taxonomy regulation requirements come into effect?
As of 1 January 2022, the regulatory requirements under the Taxonomy Regulation shall apply for financial products which are promoting (Art. 8 SFDR / Art. 6 Taxonomy Regulation financial products) or have as their objective (Art. 9 SFDR / Art. 5 Taxonomy Regulation financial products) climate change mitigation and/or climate change adaptation.
For the four remaining environmental objectives, the Taxonomy Regulation rules will apply from 1st January 2023.
However, the final report on draft Regulatory Technical Standards (“RTS”) regarding disclosures and mandatory templates for pre-contractual and periodic information under the SFDR as amended by the Taxonomy Regulation has been published by ESAs on 22 October 2021 and still needs to be adopted by the EU commission. This RTS which includes the content, methodologies and presentation of the SFDR and Taxonomy Regulation-related disclosures shall.
In addition, we would like to remind you that the periodic reporting obligation under Article 11 SFDR shall apply as of 1 January 2022 if your fund qualifies as an Article 8 SFDR or Article 9 SFDR meaning that such relevant information shall be disclosed in your annual reports to be published in 2022 (for the reporting year 2021).
How to implement the Taxonomy Regulation requirements in your fund documentation?
- Contact your legal advisor, as soon as possible, in order to receive advice on the new Taxonomy-related disclosures to be included in your Fund documentation and in particular:
- If your Fund/Sub-Fund qualifies as an Article 6 SFDR Fund/ Non ESG Fund: A negative disclaimer shall be inserted in your Prospectus/Offering Document/Supplement to inform investors that the Fund/Sub-Fund does not take into account criteria for environmentally sustainable economic activities.
- If your Fund/Sub-Fund qualifies as an Article 8 or as an 9 SFDR Fund and promotes or has at its objective a climate-related objective: We would recommend you to:
- Include information on Taxonomy Regulation in the Prospectus/Offering Document/Supplement and specify which of the climate-related objective your Fund/Sub-fund is contributing to;
- Add a disclosure in the Prospectus/Offering Document/Supplement and annual report published in 2022 that “the “do no significant harm” principle applies only to those investments underlying the financial product that take into account the EU criteria for environmentally sustainable economic activities. The investments underlying the remaining portion of this financial product do not take into account the EU criteria for environmentally sustainable economic activities.”
- Include information on proportion of investments which take into account criteria for environmentally sustainable economic activities.
- Send to your Waystone Relationship Manager an amended version of the Prospectus/Offering Document/Supplement for our review and records.
- Ask your legal advisor to proceed with the filing of the Prospectus/Offering Document/Supplement with the CSSF and provide us with a confirmation of such filing by the end of December 2021.
No further information from the CSSF
At the date of this communication, the CSSF in Luxembourg did not communicate any information about any fast track filing process for the filing of Prospectus/Offering Document/Supplement updated with the relevant Taxonomy-related disclosures.
We will continue to keep you updated however, should you require further information in the meantime, please reach out to your usual Waystone representative or contact us.