Irish Funds Report: Review of SFDR Level 2 Disclosures

The Irish Funds Environmental, Social, Governance (ESG) Data and Reporting Working Group prepared a paper that conducts an analysis on the European Union Sustainable Finance Disclosure Regulation (SFDR) Level 2 disclosures included in periodic reports. The review looks at a sample of 146 periodic reports issued after 1 January 2023 and includes funds with year-end 31 October 2022 to 31 March 2023. 

The paper outlines expectations leading up to the Level 2 implementation and context to SFDR Level 2 disclosure requirements. SFDR requires financial market participants, financial advisors, and financial products to provide relevant and accurate data to investors to allow them to understand both the risks and the impacts associated with their investments. The implementation of SFDR “Level 2” regulatory technical standards (“RTS”) now requires more granular information on environmental, social and governance matters and performance to be disclosed in the periodic reports of in-scope financial products issued from 1 January 2023 onwards.

The paper then details the sample review and key observations including the following:

• 100% of funds reviewed in the sample claim to apply some type of exclusions policies.

• 42% of funds reviewed disclosed specific carbon-related emissions reduction or carbon-related ESG exclusions.

• 69% of funds reviewed disclosed sustainable investment exposure greater than 0%.

• 10% of the Article 9 fund sample that committed to a sustainable investment objective had investments in economic activities that qualify as environmentally sustainable under the EU Taxonomy.

• 90% of funds reviewed did not disclose Taxonomy alignment exposure above 0%.

• Of the sample of Article 8 funds and Article 9 funds reviewed, 95% disclosed whether they considered PAI indicators. Of the Article 9 funds, 98% confirmed that they considered PAI indicators in their disclosures.

Read more about the review on our Member Portal.