Did you complete the AFM SFDR Self-Assessment as one of the 115 fund managers or one of the 97 asset managers or one of the 155 pension providers last year? You are probably interested in the results. The AFM published on 14 May 2024 its report “Clear SFDR templates needed for sustainable investing”. Haven’t got around to it yet? Below a summary of AFMs findings.
Spoiler alert!
Still not complying with the basic SFDR requirements or are you not using the SFDR periodic reporting template? Then it’s high time to get started.
9% of companies still do not have a sustainability risk policy on their website.
Around 13% have no statement on their website about whether or not they consider the negative impacts of investments.
Around 15% do not have a publication on their website about the integration of sustainability risks and remuneration policy.
Are you not compliment with Level 1 SFDR? The AFM expects you to take immediate action to comply as soon as possible.
Do you need help formulating your entity requirements? Our e-paper ‘Implementing the SFDR‘ might help.
Negative impacts and the use of SFDR template (Annex I)
For those companies that consider the negative impacts of their investment decisions on sustainability factors, it appears that:
35% of asset managers do not use the mandatory template to report;
1% of pension providers did not use the mandatory template to report;
6% of fund managers did not use the mandatory template to report;
The AFM calls on firms that are not yet using the mandatory template to start doing so.
Negative impacts and incomplete use of SFDR template (Annex I)
For companies that take into account the negative impacts of their investment decisions on sustainability, the outcome of the self-assessment showed that the template was not fully completed at all times.
27% of asset managers using the template did not complete it for all mandatory indicators.
87% of asset managers did not report on at least two optional indicators.
6% of pension providers did not include information on mandatory and optional indicators in the template.
3% of fund managers did not report on all mandatory indicators.
8% of fund managers did not report on at least two optional indicators.
It is required to report on the mandatory indicators and moreover, on at least two optional sustainability indicators. It is not allowed to leave out some of these sustainability indicators.
Sustainability risks and products
For about 25% of products, no information is provided on how they deal with the integration of sustainability risks.
Of the 75% of products where this information is provided, some of them lack the additional information, i.e. on the potential impact of sustainability risks on the product’s profitability.
More specifically:
44% of asset management portfolios did not provide information on the impact of sustainability risks on their returns.
30% of the largest pension schemes did not provide information on the impact of sustainability risks on their returns.
18% of mutual funds did not disclose the impact of sustainability risks on their returns.
Need help determining the impact of sustainability risks on product returns? Our e-paper ‘Implementing the SFDR‘ can help you.
Pre-contractual product information and the template SFDR (Annex II and III)
For almost all products of pension providers and fund managers, pre-contractual templates have been used to provide sustainability information.
27% of products of asset managers did not use the mandatory template.
The presentation of information within the template does not always meet the set requirements, or the template is not published on the website.
Need help drafting or adapting the SFDR template? We explain it in more detail in this video.
Pre-contractual product information and vague language use in the template SFDR (Annex II and III)
Currently, the information provided in pre-contractual templates is often still difficult to understand. This is partly due to too vague and/or too generalized language, according to the AFM.
Need help adjusting templates due to vague language use? In this explainer video, we help you fill-out the pre-contractual product information template for Level II SFDR (note: video is in Dutch).
Periodic product information and the template SFDR (Annex IV and V)
The self-assessment shows that among the fund managers and pension providers, periodic reports are available in most cases. More specifically:
8% of pension providers have no periodic reporting available for schemes with sustainable features.
13% of fund managers have no periodic reporting available for their funds with sustainable features or targets.
For asset managers, this percentage is significantly higher:
75% of asset management portfolios with sustainable characteristics or objectives have no periodic reporting available.
For the 2023 periodic reports, all firms will be required to publish them in the standard template on their websites. The AFM will address firms that have wrongly not published their periodic reports on their websites. The AFM has previously stressed that this information should be available and finds it unacceptable that it is still not available for some products.
Need help?
Do you need help completing the annexes and meeting the requirements of the AFM? We are here to help. Read more about our ESG & Sustainable Finance services or contact us.
