Periodisk rapportering om bæredygtighed for finansielle produkter (SFDR art. 11)

The FSA has issued a memo outlining the obligations for financial market participants regarding periodic sustainability reporting. Effective from 1 January 2023, these entities are mandated to produce an annual report detailing the sustainability attributes of their financial products or the sustainable investment objectives linked to each individual product.
The frequency of this reporting is set to be annual, although the placement of this information within corporate documentation varies based on the specific type of financial market participant. For many, the requisite sustainability data will be integrated into their annual reports.
The following provisions on periodic reporting shall be noted:
If a financial instrument promotes environmental or social characteristics (as per Article 8 of the SFDR) or has sustainable investment as an objective (as per Article 9 of the SFDR), it is necessary that the financial market participant include the following in the reporting:
– the extension to which the requirements from Article 8 and/or Article 9 of the SFDR are met,
– the impact of the financial product using indicators such as indices.
– main negative impacts on the sustainability factors if the pre-contractual documents contain such information
– other requirements mentioned in the Taxonomy Regulation (TR)
If a financial product as defined in Article 9 of the SFDR invests in an activity that contributes to an environmental objective as defined in Article 2(17) of the SFDR, it is mandatory to include the following in the periodic reporting:
– the environmental objectives of the underlying investments
– whether the underlying investments are investing in environmentally sustainable activities
– what share of the product’s investments are invested in environmentally sustainable activities
– what share of the product’s investments are invested in opportunity-creating and transition activities.
The publication of the periodic reporting is found in different reports depending on the market participant. The Danish FSA has published a chart („Figur 1“) in the document to distinguish the publication placement. For example, for AIFs, it is expected to be found the annual report referred to in Article 22 i M (AIFM Directive). Additionally, this information must be published on the market participant’s website.
Annex 4 and Annex 5 of the SFDR are reporting templates that should be used starting 1 January 2023. They should not be changed and only the sections irrelevant to the specific market participant can be omitted. The financial products reported should contain at least a thorough description of the specific environmental or social characteristics or the specific sustainable investment objectives and how these have been achieved during the period.
Describing that the investment has (DNSH) to any environmental or social objective needs to include the following:
– how the indicators for the main negative impacts in Schedule 1 of Annex 1 and any indicators in Schedules 2 and 3 of Annex 1 of the SFDR Delegated Regulation have been considered,
– whether the underlying investments were in compliance with OECD Guidelines for multinational enterprises and the UN Guiding Principles on Business and Human Rights
How the main negative impacts on sustainability factors are taken into considered for the financial products (PAI at product level)
The financial market participant should include in the periodic reporting the main negative impacts of investments on sustainability factors if this has been agreed on in the pre-contractual document. Each financial product needs to be thoroughly described, including which negative impact exactly and procedures to minimize it. Tables 1, 2 or 3 in Annex 1 of the Delegated Regulation to the SFDR can be used as an example of indicators. This disclosure requirement is not the same as the reporting requirement that the investment has DNSH.
Largest investments
The market participant should include a list of the top 15 investments, or at least 50% of the investments (either in descending order) representing the financial product’s investment, and its details:
– name (e.g. of the company invested in)
– share of the investment (in percent)
– sector and country (country of investment / country of underlying company / country of underlying product) where the investment has been made.
Asset allocation
For products covered by Article 8 of the SFDR, market participants should describe the proportion of the financial product’s investments that have met the environmental or social characteristics promoted during the period.
For products covered by Article 9 of the SFDR, market participants should describe the proportion of the financial product’s investments that contributed to the achievement of the sustainable investment objectives during the period covered by the periodic reporting.
Moreover, it is important to describe the rest of the investments, including their purpose if they have not helped in achieving the sustainable investment goals, although all investments covered by Article 9 should be generally ’sustainable‘, with some exceptions like cash or for hedging purposes.
Market participants are requested to describe each investment’s contribution to the specific environment objective, including underlying investments. Additionally, if it is expected that the product’s total investments in environmentally sustainable economic activities changed over time (e.g. due to the change in the share of investments in these activities, without actually changing the investment strategy), it is mandatory to include this information in the pre-contractual documents.
Sustainability-related performance of the index specified as the reference benchmark
If the market participant has indicated the use of an index in a benchmark in the pre-contractual documents, it is necessary that this is described in the periodic reporting and includes at least:
– reasoning how the specific index is different from the one in the broad market index
– the performance over the period of the sustainability indicators to identify the index’s compliance with sustainability requirements
– a comparison of the performance of the product versus the sustainability of the index
– a comparison of the performance of the product versus a relevant market index
Periodic reporting information should also be compared against one another, up to at least 5 previous periods.
If financial products with more than one investment option are offered, it is crucial to list all of these options in the periodic reporting.