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The ESAs have retained the requirement for FMPs to disclose whether their taxonomy adjustment disclosures are reviewed by an auditor or other third party, and if so, they must identify the auditor or the third party. This change is intended to address concerns that products with high exposures to sovereigns may be viewed as having low taxonomy compliance due to the lack of a reliable methodology for determining the taxonomy adjustment for exposures to sovereigns. One for all investments excluding sovereign debt.One for all investments including sovereign debt and.FMPs will have to show two sets of Taxonomy alignment disclosures: In addition, the following explanations shall be included 1) a breakdown of activities invested in by environmental objectives they contribute to and 2) whether the activities are enabling or transitional (requirements of the TR).Īnother relevant change is the distinguishing of sovereign bonds. The KPIs will be represented in a bar chart. Essentially, the same KPI must be used for all investments in the pre-contractual disclosure, and it should be illustrated by a pie chart.įor periodic disclosures the extent of taxonomy-alignment shall be illustrated using each of the three KPIs (turnover, CapEx and OpEx), not just the KPI used in the pre-contractual disclosure. Alternatively, FMPs can apply capital expenditure or operational expenditure when justified by the features of the financial product. The ESAs have proposed different approach for pre-contractual and periodic disclosures.įor precontractual disclosure the KPIs are calculated based on taxonomy-compliant activities and turnover shall be used per default for investments in non-financial companies. The taxonomy-alignment of investments in non-financial companies can be calculated using one of the following key performance indicators (KPIs): Turnover, Capital Expenditure (CapEx) or Operating Expenditure (OpEx). Calculation of Taxonomy-aligned investments.The new clarification confirms, both has to be performed. This is a substantial change: previously the industry was hoping to just apply DNSH-assessment through the application of the Taxonomy Regulation. Under the updated RTS FMPs will have to apply the SFDR DNSH-assessment using the principal adverse indicators (PAI) for their taxonomy-aligned economic activities. The DNSH requirement under the Taxonomy Regulation states that in order to determine the degree of environmental sustainability of an investment, an economic activity must not significantly affect any of the environmental objectives referred to in Article 9 of the Taxonomy Regulation. The DNSH requirement for a sustainable investment as set out in SFDR is assessed against the principal adverse impact (PAI) indicators in Annex I of the SFDR RTS. In general, there are two different principles of “do no significant harm” (DNSH): one under SFDR and one under the Taxonomy Regulation. “Do no significant harm” assessment based on both SFDR and Taxonomy Regulations.These sustainability preferences shall be interpreted (according to MiFID II) as products which invest a minimum proportion in sustainable investments or taxonomy-aligned investments and this minimal proportion is defined by the client. The updated MiFID II Suitability, applicable from August 2022, requires relationship managers to explicitly ask their clients for sustainability preferences.
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The suggested product categorisation is also consistent with the concept of “sustainability preferences” according to the MiFID II Suitability assessment rules, published in June 2021.