Sustainability-related Disclosures to be made by PIFs and De Minimis AIFMs under the ‘SFDR’

Deloitte Malta News Alert

01 November 2021

The MFSA outlines the process to be followed

The EU Regulation (2019/2088) on sustainability-related disclosures in the financial services sector (hereinafter referred to as the ‘SFDR’ or the ‘Regulation’) introduces several disclosure-related requirements for financial market participants (‘FMPs’) and financial advisors (‘FAs’) with respect to (i) the integration of sustainability risks into business practices; (ii) the consideration of adverse sustainability impacts in their processes; and (iii) the provision of sustainability-related information with regards to financial products.

The EU, as part of its sustainable development policy agenda, strives to make environmental, social and governance (ESG) concerns a focal point of regulation in the financial services industry. To this end, the SFDR together with a range of other EU sustainable finance initiatives aim towards building a sustainable economy by prompting the financial sector to support sustainable activities and rotate capital away from harmful ones.

The majority of the Regulation’s substantive requirements have been applicable as of 10 March 2021, in terms of which FMPs and FAs were already under the obligation to comply with a number of disclosure requirements as stipulated by the SFDR (‘SFDR Level 1 requirements’). The SFDR Level 1 requirements are now to be supplemented by more detailed Level 2 requirements in the form of a Delegated Act implementing regulatory technical standards (‘RTS’) on the content, methodologies and presentation of disclosures under the Regulation and which are due to enter into force on 1 July 2022.


The SFDR brings within scope investment services license holders (‘LHs’) defined in the Regulation as financial advisors (FAs) providing investment advice or insurance advice with regard to insurance-based investment products (IBIPs) as well as FMPs performing portfolio management services and/or manufacturing and selling financial products, which include, inter alia, UCITS, AIFs and MiFID portfolios or segregated accounts marketed within the EU.

Following the European Commission’s clarification on the scope of the FMP’s definition in July 2021 due to questions posed by EU Member States, it was affirmed that registered/sub-threshold alternative investment fund managers (‘AIFMs’) as referred to in Article 3(2) of the AIFM Directive (‘AIFMD’) were also captured by the FMP’s definition found under the Regulation.

In light of this, with reference to the local regime, the SFDR definition of a FMP should include both professional investor funds (‘PIFs’) and de minimis AIFMs and therefore subjecting them to the disclosure requirements of the Regulation.


The Regulation prescribes disclosures to be made by LHs both at the legal entity and at financial product level. These disclosure-related requirements are to be satisfied through the publication of certain information regarding the integration of sustainability risks into the investment decision-making process or in the investment or insurance advice provided; the manner in which those risks are integrated; and the results of the firms’ assessment on the identification and prioritisation of principal adverse sustainability impacts of investment decisions on sustainability factors. Remuneration policies also need to be updated accordingly to reflect consistency with any integration of sustainability risks and disclosed properly.

Furthermore, legal entities falling within scope of the Regulation are under the obligation to disclose financial product information related to sustainability for both ESG-related and non-ESG products. The SFDR requires FAs and FMPs to classify the financial products or advice they offer into one of the three following categories: a) mainstream products; b) products promoting ESG characteristics; and c) products with sustainable investment objectives.

The Regulation mandates the publication of the aforementioned information to be made on the entities’ website and in any of their pre-contractual agreements (i.e. prospectuses or private placement memoranda or investment management agreements) taking a ‘comply or explain’ approach on whether or not sustainability factors have been considered, regardless of the firms’ ESG focus.

MFSA process

On 30 September 2021, the Malta Financial Services Authority (‘MFSA’) issued a Circular on the local implementation of the SFDR (Level 1 requirements) and the process to be followed for the submission of updates to the offering documentation of PIFs and de minimis AIFMs. The MFSA has established a fast-track filing process whereby PIFs and de minimis AIFMs will be able to ‘self-certify’ their compliance with the precepts of the Regulation and notify the MFSA accordingly. The Circular also lists the necessary documentation to be filed with the MFSA at the earliest and no later than 31 December 2021.

Deloitte Malta will be monitoring developments in the furtherance and implementation of the SFDR both locally and overseas.

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