Malta: Heading Towards A Greener Future Into The New Year – SFDR RTS Deadline Approaches

On the rapidly developing subject on sustainable finance, yet another deadline looms. On the 1^st of January 2023 the final report on the on the draft Regulatory Technical Standards ("RTS"), published by the European Supervisory Authorities ("ESAs") on the 30^th of September 2022, comes into force.

The main aim of the amendments is to ensure that disclosures about the degree to which investments are in taxonomy-aligned activities provide for full transparency about investments in fossil gas and nuclear energy activities, in particular on the proportion such investments in fossil gas and nuclear energy activities, in particular on the proportion such investments represent within all investments and in environmentally sustainable economic activities.

The RTS outline amendments to Delegated Regulation (EU) 2022/1288. The main amendments provide templates for how financial products that promote environmental characteristics (i.e. Article 8 products) and those that have sustainable investment as an objective (i.e. Article 9 products) should be presenting their pre-contractual disclosures and period disclosures.

The ESAs also published a Questions and Answers ("Q&As") document on 17^th November 2022 on the SFDR Delegated Regulation (Commission Delegated Regulation (EU) 2022/1288) for further guidance as to how the disclosures should be addressed in practice.

Looking at the local expectations in the context of sustainable finance, on 20^th December 2022 the Malta Financial Services Authority ("MFSA") also issued a letter addressed to Board Members and Compliance Officers of fund managers, self-managed schemes and third-country fund managers marketing their funds in Malta through the AIFMD national private placement regime, outlining their expectations in relation to ESG requirements.

The letter highlights how through an exercise carried out by the MFSA, it seems that the majority of local investment funds still fall within the category of Article 6 products, with only a small part of the local population of investment funds being classified as Article 8 or Article 9 products. The letter also indicates how the MFSA is currently carrying out a desk-based review of the website disclosures used by fund managers and will also be issuing a set of high-level observations in this regard. The MFSA will thereafter be turning their attention to product level disclosures by adopting a risk-based approach. The MFSA letter stresses how it expects that fund managers to strive towards transitioning to green, embracing sustainable finance and integrating this in their governance, risk management and investment policies. The letter also hints that the MFSA expects that sustainability is incorporated within the culture of fund managers, in particular during Board Meetings.