EU Sustainable Funds & Taxonomy

EU Sustainable Funds & Taxonomy

Our Funds & Investment Management teams in Ireland and Luxembourg are highly focused on the impact of the EU's Sustainable Finance Action Plan for the European asset management sector, in particular the implementation of EU Sustainable Finance Disclosure Regulation ("SFDR") and the Taxonomy Regulation.

SFDR

SFDR seeks to establish a harmonised approach with respect to sustainability-related disclosures provided to investors within the European Union's financial services sector. SFDR requires asset managers to provide more transparency regarding how they integrate sustainability risks into their investment decisions and the consideration of principal adverse sustainability impacts into the investment process.

SFDR applies to asset managers (and investment advisors) domiciled or operating in the European Union, who are managing or distributing financial products to European investors.

SFDR identifies two types of sustainability focused financial products:

• one that promotes environmental or social characteristics (Article 8 financial products); or
• that has a sustainable investment objective (Article 9 financial products).

Asset managers managing or distributing Article 8 or Article 9 financial products are subject to transparency and disclosure requirements and ongoing reporting obligations, at both the entity and the financial product level.

TAXONOMY REGULATION

The Taxonomy Regulation seeks to establish a framework to classify environmentally sustainable economic activities (otherwise known as Taxonomy-aligned activities), and establishes performance criteria for assessing the contribution of these activities towards six environmental objectives:

1. Climate change mitigation
2. Climate change adaptation
3. Sustainable use and protection of water and marine resources
4. Transition to a circular economy
5. Pollution prevention and control and protection
6. Restoration of biodiversity and ecosystems

Economic activities are deemed Taxonomy aligned where such activity contributes substantially to one or more of the environmental objectives and does no significant harm (DNSH) to any of the environmental objectives. Members of our ESG Advisory Group co-authored with the Frankfurt School of Finance and Management and the Environmental Liability Solutions Europe Ltd on a Do No Significant Harm Handbook, to assist asset managers to identify good practices and provide guidance on the evaluation and reporting of ‘do no significant harm’ principle under EU sustainable finance regulation. You can read more on the DNSH Handbook on our ESG & Sustainable Finance page.

How we can help

The Maples Group has collaborated with leading global asset managers and institutional investors operating within the European Union to develop end-to-end SFDR compliance solutions at both the operational level within the asset manager and at the underlying fund / financial product level.

Our ESG specialists can audit policies and procedures to identify those affected by SFDR and Taxonomy and best advise how those policies can be enhanced to integrate the consideration of sustainability risks into the investment decision-making process and overall risk framework.

At the underlying fund / financial product level, we can assist with SFDR financial product analysis, including undertaking a full review of all offering documents and marketing collateral to assist with the determination of SFDR product categorisations, as well as assisting with the preparation of the Article 8 and Article 9 pre-contractual disclosures, website and periodic disclosures.

Our ESG Advisory Group proactively collaborates with external stakeholders operating in the European sustainability space and has co-authored with AIMA on its Guides on both SFDR Level 1 and SFDR Level 2.