Comparing ESG disclosure rules for funds in the EU, UK and the US

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Key takeaways:

  • Europe’s Sustainable Finance Disclosure Regulation (SFDR) has been followed by equivalent proposals in other jurisdictions, particularly the UK and US.
  • The European regime and the UK and US proposals are not fundamentally inconsistent but there are clear differences in approach, particularly on labelling.
  • Fund managers marketing products into each of the jurisdictions will be likely be set down a path of differentiated, not harmonised, disclosures.
  • ESG strategies must remain true to identified objectives and not be overly calibrated to the regulatory requirements of any one jurisdiction or they risk non-compliance with the requirements of other jurisdictions.

The investment community continues to finalise arrangements ahead of the EU’s Sustainable Finance Disclosure Regulation (SFDR) product-level or “level 2” disclosure requirements taking effect on 1 January 2023. At the same time, it is keeping an eye on two sets of proposals in other jurisdictions. First, the Sustainability Disclosure Requirements (SDR) proposed by the UK’s Financial Conduct Authority (FCA) in a Discussion Paper issued in November 2021. Second, in the US, two ESG-related proposals from the Securities and Exchange Commission (SEC) in May 2022, which contemplate changes to the “Names Rule” and to a range of disclosure requirements (together SEC Proposals).

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