Legal Updates

Introduction

The Taxonomy Regulation requires financial market participants including UCITS management companies, alternative investment fund managers (“AIFMs”), self-managed UCITS funds or internally managed AIFs that make available financial products (Article 6, Article 8 and Article 9 of the Sustainable Finance Disclosure Regulation (“SFDR”)) to provide for the transparency of environmentally sustainable investments in pre-contractual disclosures and in periodic reports in relation to certain environmental objectives.

The SFDR requires these financial market participants and financial advisers to make disclosures to end investors, in relation to the integration of sustainability risks, the promotion of environmental or social characteristics and sustainable investment.

The “Level 1” Taxonomy Regulation requirements will apply from 1 January 2022¹ and will require updates to pre-contractual documentation for UCITS and AIFs. “Level 2” SFDR disclosure requirements (which also include Taxonomy-related disclosures) (“SFDR Level 2 Measures”) will apply from 1 July 2022.

Fast-track Filing Process

A fast-track filing process for pre-contractual document updates required under the Taxonomy Regulation and the SFDR Level 2 Measures has been established by the Central Bank of Ireland (“Central Bank”) and it has now released details around the filing procedures applicable to the filings to be made in advance of 1 January 2022.

The Central Bank communication confirms that the same fast-track process will apply for the prospectus disclosures imposed under SFDR Level 2 Measures which apply from 1 July 2022.

The introduction of a fast track process is a very welcome development which provides certainty as to when the requisite updates will need to be made what will be involved in the process so that financial market participants can now proceed to action accordingly.

Key Points to note on the Fast Track Process

General

The Central Bank has confirmed that the responsibility for ensuring compliance with the disclosure obligations arising under the Taxonomy Regulation (and the SFDR Level 2 -Measures) rests with the relevant UCITS management company, AIFM or the board of directors in the case of a self-managed UCITS fund or internally managed AIF (collectively referred to as “Managers”). Each Manager will be required to certify compliance with the applicable disclosure requirements via an attestation.

It also confirms that the Central Bank will be carrying out sample checks of filings made by Managers and will engage with any applicants where questions arise in respect of the disclosures made. This may result in the Central Bank requiring revisions to be made to the prospectus disclosures at a later date.

The fast-track process is only available in respect of funds which are already approved by the Central Bank and the filing must follow the prescribed format set out in its communication. Documents should be dated as of date of submission to the Central Bank.

Filings under Level 1 of the Taxonomy Regulation

Filings relating to disclosures being made under Level 1 of the Taxonomy Regulation may be made from 16 November 2021 and must be made no later than 14 December 2021 via SFDR@centralbank.ie. On an exceptional basis, the Central Bank may permit an extension to the proposed deadline where a reasonable rationale explaining why such an extension is necessary for the specific fund can be provided.

Filings under SFDR Level 2 Measures

As noted above, the SFDR Level 2 Measures apply from 1 July 2022. However, the Central Bank has confirmed that filings of prospectuses which have been updated to address the SFDR Level 2 Measures may be made at any point after 31 March 2022 but must be made no later than 27 May 2022, noting that this filing deadline may be subject to change. Please get in touch with your usual Dillon Eustace contact if you would like to discuss the Taxonomy Regulations or SFDR.

1. Disclosure obligations relating to the environmental objectives of climate change mitigation and climate change adaptation apply from 1 January 2022 with the disclosure obligations relating to the remaining four environmental objectives applying from 1 January 2023.