On October 30, the European Commission (the Commission) published a letter from John Berrigan (the Commission’s Director General for Financial Stability, Financial Services and Capital Markets Union) to the European Securities and Markets Authority, European Insurance and Occupational Pensions Authority, and the European Banking Authority (jointly the European Supervisory Authorities (ESAs)) regarding a delay to the implementation of detailed subordinate rules under the Sustainable Finance Disclosure Regulation (SFDR or Disclosure Regulation) caused by the COVID-19 pandemic (the Letter).

It was originally intended for the ESAs jointly to develop draft detailed subordinate rules under the SFDR by December 30, with such rules to apply from March 10, 2021. In the Letter, Mr. Berrigan states that: “It was clear from the outset that this would be a very challenging deadline, given the time needed for the adoption of the rules, scrutiny in accordance with the [ESAs’ regulations] and subsequent publication in the Official Journal [of the EU].”

He further notes that: “The unprecedented economic and market stress caused by the Covid-19 crisis has necessitated an extension of the deadline for the public consultation on the draft [detailed subordinate rules]. While the delay is unfortunate, it is justified by the need to guarantee sufficient stakeholder involvement in the process given the current difficult circumstances. This extension will allow stakeholders the time needed to properly address the complex issues contained in the joint consultation paper.”

However, the Letter clarifies the SFDR’s implementation is not conditional on the formal adoption and entry into force of the detailed subordinate rules, so all EU financial market participants and financial advisers subject to the SFDR will still need to comply with its high level and principle-based requirements from March 10, 2021, with the new detailed rules becoming effective at a later date.

It is noteworthy that even though the United Kingdom will have formally left the European Union at 23:00 London time on December 31, the SFDR’s high level and principle-based requirements will be applicable to UK-based financial market participants and financial advisers on March 10, 2021. The UK Government is yet to decide if the detailed subordinate rules will be applicable to UK firms.

The Letter is available here.