In short: The SFDR obligates financial market participants and financial advisors to disclose to clients and investors how green the financial product is, including, for example, discretionary portfolio management mandates, EU funds (UCITS, AIF) and pension products. Moreover, it stipulates that you must disclose how sustainability risks are integrated into the provision of services such as portfolio management and investment advice, regardless of whether the mandate or product is classified as ESG or mainstream. Under the SFDR, you must classify your financial products into one of three categories: mainstream, light green or dark green. Additionally, it is required that you implement a due diligence process to consider the ‘principal adverse impacts’ (PAI).
The Swiss investment manager of an EU fund therefore needs to (i) consider sustainability risks when making the investment decisions, (ii) provide information on how sustainability risks are considered in the remuneration structure and (iii) review how principal adverse impacts are considered and affect the return of the financial product. This means that the corporate and product governance of the Swiss investment manager will be assessed against these requirements. The information will be reported to the management company to fulfil its obligation under the SFDR. Furthermore, this triggers amendments in the EU fund’s prospectus.
For example, regulators request that the updated EU fund prospectuses are handed in by the end of February 2021.
The following key topics need to be assessed against the SFDR requirements:
Time is rushing by and the applicable date for these topics, 10 March 2021, is getting closer.
Preparation is half of the battle. Due to our broad implementation experience regarding SFDR, we design individualised working packages for you to meet the deadline of 10 March 2021. Our dedicated sustainable finance experts support EU- and Swiss-domiciled clients in implementing SFDR. We can support you and your management company in the EU to update the prospectus, improve your corporate and product governance, and implement all necessary processes.
Please see our dedicated service offering for the SFDR implementation and other services to help you in the transition to a sustainable business. Let us do the work, so that you can focus on your core business.
Join us to find out how the financial industry, and in particular asset and wealth managers, are currently responding to the new challenges and what are the hot topics arising from these two regulations.
Dr. Antonios Koumbarakis
Sustainability & Strategic Regulatory Leader, PwC Switzerland
Tel: +41 58 792 45 23