Irish guidance on streamlined SFDR filing process ‘offers greater flexibility’

The SFDR requires financial market participants and financial advisers, including Alternative Investment Fund Managers (AIFMs), to make pre‐contractual and ongoing disclosures to end investors on how they consider and integrate sustainability risks and how they promote environmental or social characteristics in their investments.

While SFDR Level 1 requirements came into force on 10 March 2021, Level 2 requirements are set to apply from 1 January 2023, requiring updates to pre-contractual documentation for Undertakings for Collective Investment in Transferable Securities (UCITS), Retail Investor Alternative Investment Funds (RIAIFs) and Qualifying Investor Alternative Investment Funds (QIAIFs).

Áine Ní Riain of Pinsent Masons said: “The Central Bank’s guidance (6 pages / 374KB PDF) on the terms of its fast-track is very welcome. It offers greater flexibility than the two previous SFDR fast-tracks and affords managers the opportunity, not only to bring their documents in line with the applicable Level 2 requirements, but also to take account of the Commission’s, ESA’s and ESMA’s requirements that issued since last year’s fast-track. Helpfully, it is also open to Article 6 funds that need to update their product-level PAI disclosures.”

As with previous SFDR-related streamlined processes, the Central Bank requires the submission to be accompanied by a certification from the relevant management company that the amendments are made in accordance with the Level 2 requirements and made for consistency with the annex disclosures. Management companies must also certify that the amendments required product-level principal adverse impacts (PAI) disclosures – for Article 6 funds – and/or made to reflect the European Commission’s Q&As on SFDR, as well as the ESMA supervisory briefing on sustainability risks and disclosures in the area of investment management, and clarifications from the ESAs or the Central Bank.

Meanwhile, submissions filed with the Central Bank that have not yet been cleared of comment by the filing deadline will need to comply with the usual review process, even where those submissions are ultimately cleared of comment prior to 1 January 2023. The Central Bank said that submissions that are clear of comment before the filing deadline, but not yet authorised, will also need to comply with its usual review process.

In cases where an SFDR-related change of name is required, the submission should be made via the Portal in the usual manner. The Central Bank said it will apply a version of the streamlined process in such cases, as long as the submission includes a relevant attestation. It added that filings that include SFDR-related updates involving reclassification of a fund can still be submitted under the streamlined process but said that a rationale for the reclassification must be included.

According to the Central Bank, managers that have made a submission for the authorisation of a new fund or a sub-fund cannot qualify for the streamlined process. It said it would review the disclosures made in relation to SFDR Level 2 requirements in such applications. It also said the streamlined process will not be available for SFDR Level 2 requirements after 1 January 2023, adding that submissions made after the deadline will be reviewed by the bank and may be subject to comment.

The Central Bank’s streamlined filing process has already opened and filings for all UCITS, RIAIFs and QIAIFs must be made by email no later than 1 December 2022.