AEIP gives its input to the ESAs joint consultation on ESG disclosures
AEIP responded to the joint consultation of the European Supervisory Authorities (ESAs) regarding the development of Regulatory Technical Standards (RTS) for the ESG disclosures Regulation. AEIP has welcomed the opportunity to provide input and gave its feedback on a series of points. We appreciate the action of the ESAs to highlight to the European Commission the extremely tight implementation deadline, since we are concerned that our members will not be able to achieve compliance with the SFDR within the timespan between the adoption of the Regulatory Technical Timeline and the 11 of March 2021. At the same time, we believe that regulators should aim for consistent principles and requirements across different parts of the EU Sustainable Finance agenda, since, for example, the proposed set of the so-called ‘adverse impact indicators’ is namely not aligned with the ‘do-no-significant-harm’ criteria introduced by the Taxonomy Regulation.
Importantly, the best effort approach to obtain data from companies does not reflect the operational realities of pension funds. Article 7(2)a implies that financial market participants should first aim to obtain any missing data on the adverse impact indicators from investee companies. In reality, financial market participants will rely on external data suppliers that will collect data directly from investee companies or conduct their own research to arrive at reasonable estimates. Furthermore, the RTS seem to be designed for fairly simple retail funds, consisting mainly of listed equity and fixed income securities, for which a lot of data is already available. Pension funds’ portfolios are more complex and encompass all types of (long, non-leveraged) assets, including private equity, real estate, infrastructure, private debt, securitized assets and commodities. While these alternative assets only represent a minor part of the portfolio, reporting is required against all assets. While recognize the benefit of considering the social and environmental impact of some of these categories of assets, data is often completely missing. Moreover, the administrative burden of full compliance against the concept RTS therefore may be much higher for a pension funds than e.g. retail fund managers.
For AEIP’s full input to the ESAs joint consultation, please see here.