The Central Bank of Ireland (CBI) will fast-track the approval process of fund document updates ahead of the arrival of the Sustainable Finance Disclosure Regulation (SFDR) ‘level 2’ requirements, amid fresh market uncertainty over the new rules.

It comes after the European Supervisory Authorities (ESAs) sent new questions to the European Commission over key aspects of the regulation last month, leaving some asset managers scrambling to change their fund documents.

The European Commission has yet to clarify the questions raised by the ESA.

According to updates from several law firms, asset managers must submit their amendments to the CBI by 1 December, one month ahead of the introduction of the next level of SFDR.

Áine Ní Riain, investment fund associate at Pinsent Masons, said: “The questions cover some fundamental aspects of the SFDR’s application and could have a significant bearing on the documents that need to be finalised ahead of the CBI’s December deadline.

“While the ESA’s queries are valid and the Commission’s clarifications are needed, they could be at odds with managers’ present interpretations of the SFDR – forcing managers to revisit their disclosures with little time to spare.”

The fresh queries related to how the definition of “sustainable investments” under Article 2 of SFDR will be applied to companies that do not specify the use of proceeds.

For example, whether a company that reports 20% of its economic activities as either environmental or social objectives would be categorised under SFDR.

The ESA also queried the application of the 500 employee’s principle adverse impact threshold and the frequency of the periodic disclosure for portfolio management services.

Pinset Masons added asset managers must update their fund documents as a “matter of urgency”.

The Irish regulator is expected to issue guidance on the fast-track process “in the coming weeks”.

SFDR ‘level 2’ obligations require companies to report on 18 mandatory principle adverse impacts statements (PAIS), as well as other voluntary areas which go as far as the risks to a products’ valuation due to environmental impacts.

The implementation of the second phase of SFDR was delayed by six months by the European Union last year due to the “length and technical detail” of the directive.

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