The Danish FSA: Significant Room for Improvement for SFDR Disclosures

Published 15 December 2021

PrintCategory: AIFs

The Danish FSA has assessed the quality of 4 pension companies and eight credit institutions’ website disclosures with regards to information about their policies on the integration of sustainability risks in the investment decision-making process (so-called “art. 3 disclosures”).

The Danish FSA concludes that there is significant room for improvement.

Overall, the Danish FSA stresses that sustainability risks are those sustainability risks that the company is exposed to and not the company’s impact on sustainability related factors. Thus, it is important to separate the disclosure of sustainability risks from the company’s impact on sustainability goals.

The Danish FSA’s points out that the most adequate art. 3 disclosures:

  • Include a clear assessment of relevant sustainability risks as defined in the SFDR, i.e. an “environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the investment”.
  • Provide a nuanced and specific assessment of what sustainability related risks (i.e. the risk of negative impact on the value of an investment) applies across the types of investments made to provide the investors with a sense of the Fund’s exposures.
  • Describe where and how the sustainability risks are integrated into the investment decision-making process to inform the investors of how the Fund Manager in fact considers the identified risks.
  • Are easy to find and access on the website as an individual policy for integration of sustainability risks or is clearly stated in a section for integration of sustainability risks in a more general sustainability policy.
  • Are followed in practice by the Fund Manager in question.

For now, the Danish FSA will not impose supervisory actions on the companies surveyed since this is still a new regulatory landscape. Instead, the companies surveyed will receive individual feedback, in which the Danish FSA elaborates on the shortcomings in the policies of the respective companies.

Go read the full report published by the Danish FSA here.

Tags:  AIFMDComplianceDisclosure RequirementsSustainability


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