Insights

On 30 July 2021 the Malta Financial Services Authority (the “MFSA”) issued a circular on the application of the SFDR[1] and the request for information on operational and compliance readiness by financial market participants (“FMPs”) and Financial Advisors (“FAs”) (the “Circular”).  The SFDR applies to a wide range of entities such as investment firms or credit institutions providing portfolio management and/or investment advice, AIFMs and manufacturers of pension products.

By the 10 March 2021, FMPs were required to comply with a number of high-level principles- disclosure requirements under the SFDR (“SFDR Level 1 requirements”). These included prospectus updates and website disclosures as well as the updating or preparation of a sustainability risk policy. The SFDR Level 1 requirements are supplemented by more detailed Level 2 requirements (“RTS”) and these requirements were due to enter into force from 1 January 2022.

The MFSA has informed the industry that the European Commission (the “Commission”) plans, for the adoption of the RTS under article 2a, (3), 4(6) and (7), 8(3), 9(5), 10(2) and 11(4) of the SFDR and their application, to be bundled with the remaining RTS (i.e. all 13 RTS) in a single delegated act with a deferred application date of 1 July 2022.

Request for Information

The Circular, more importantly, includes a formal Request for Information (the “ROI”) to be duly completed and submitted to the MFSA by all FMPs and FAs within the scope of SFDR by the 10 September 2021. The MFSA has also additionally included a sector-specific Guidance Note to assist with the completion of the ROI which also sets out the salient obligations emanating from the SFDR in relation to, amongst others, products classification and distribution, governance, website disclosures and remuneration policies.

The purpose of the ROI is to establish the extent to which FMPs and FAs have identified which sustainability and environmental social and governance (“ESG”) matters are material to their business and what their sustainable and ESG objectives should be. These entities are also required to consider the steps necessary to apply and follow through these objectives in their day-to-day operations.

Other Updates

In addition to the above, the MFSA, on the 5 August 2021, published a Q & A with respect to the application of the SFDR and the ROI, and bring to the attention of FMPs and FAs the recent EU Commission Decision adopted on 6 July 2021 which sets out to provide answers on the interpretation and applicability of the SFDR in reply to the communication sent by the European Supervisory Authority in January 2021.

The information provided by the Commission is intended to clarify the provisions already contained in the applicable SFDR and in no way extends or introduces additional obligations and/or requirements.

[1] Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector