Delay to the Disclosure Regulation Level 2 RTS confirmed

05 November 2020

On 20 October 2020, the European Commission confirmed in a letter to the European Supervisory Authorities, that the Level 2 draft regulatory technical standards (RTS) due to accompany the Level 1 requirements of the Sustainable Finance Disclosure Regulation ((EU) 2019/2088) (the Disclosure Regulation) from 10 March 2021 have been delayed.

The letter sets out that the unprecedented economic and market stress caused by Covid-19 has necessitated an extension of the deadline for the public consultation on the draft RTS and more importantly, that the application of the Disclosure Regulation itself is not conditional on the formal adoption and entry into force of the RTS.

This means that, from 10 March 2021, in-scope firms should seek to comply with the general Level 1 principles of sustainability-related disclosures on a high level best efforts basis in pre-contractual documents, periodic reports and on their website at both firm and product level. It was noted in the letter that, in respect of transparency of adverse sustainability impacts, firms may be able to draw from the information already disclosed in compliance with the non-financial reporting requirements under Directive 2013/34/ EU (Accounting Directive) and other international standards. Firms will then need to carry out a second update to reflect the requirements of the RTS, once implemented.

The extent of the delay to the RTS has not been confirmed but the revised deadline is expected to be January 2022. In the meantime, the wait for the detailed requirements on the content and presentation of disclosed information as determined by the RTS continues.

While the delay is unfortunate, it is justified by the need to guarantee sufficient stakeholder involvement in the process given the current difficult circumstances.