ESG, Legal Alerts/21 Jan 2021

Sustainability Disclosure Requirements for Fund Managers

A new EU regulation on sustainability-related disclosures in the financial sector (2019/2088/EU) (the “Disclosure Regulation”) will apply as of 10 March 2021 with some exceptions coming into force later on as described below. In addition, a new regulation on the establishment of a framework to facilitate sustainable investment (2020/852/EU) (the “Taxonomy Regulation”) will enter into force in phases with the first phase applying as of 1 January 2022 and the second as of 1 January 2023. These regulations introduce new disclosure and reporting obligations for all alternative investment fund managers (“AIFM”) and other Financial Market Participants as they are defined in the Disclosure Regulation.

Key changes

  • The Disclosure Regulation will impose new obligations on all AIFMs (authorised, registered, and EuVECA managers) regardless of whether green products will be offered to investors.
  • Certain information must be published in the disclosure document referred to in Article 23 of the Alternative Investment Fund Manager Directive (AIFMD) (in Finnish “olennaiset ja riittävät tiedot”) and/or on the AIFM’s website.
  • Certain additional disclosure requirements apply if the AIFM manages a fund which has sustainable investments as its objective or promotes environmental or social characteristics.


The Disclosure Regulation and the Taxonomy Regulation are part of the European Commission’s action plan for financing sustainable growth. The Taxonomy Regulation establishes a list of environmentally sustainable economic activities. Other key legislation addressing the actions announced in the action plan are e.g. the regulation amending the benchmark regulation (2019/2089/EU), which will create a new category of benchmarks to help investors better understand the relative carbon impact of their investments. Delegated acts under the MiFID II, UCITS and AIFMD, which seek to integrate sustainability into existing organisational rules and conduct of business rules and to include ESG considerations in the advice that firms offer to their clients, also play an important role vis-à-vis the action plan.

Furthermore, the non-financial reporting directive (NFRD) is being revised in order to e.g. improve the disclosure of climate and environmental data by companies. Improved disclosure will ensure that investors are better informed about the sustainability of their investments and help Financial Market Participants meet their obligations under the Disclosure Regulation and the Taxonomy Regulation.

The new regulations require a number of more detailed level 2 delegated regulations (“RTS”) to be put in place before AIFMs and other Financial Market Participants have a complete picture of how they should comply with the new regulations. Draft RTS are available, but they have yet to be finalised as of the time of writing.

The main goal of the Taxonomy Regulation and the Disclosure Regulation is to prevent greenwashing by ensuring consistency in the disclosure and transparency obligations with which Financial Market Participants are required to comply. This will allow investors to make more informed investment decisions by ensuring that they are able to compare different financial services and products from the perspective of sustainability more easily. The Disclosure Regulation applies to all AIFMs (regardless of whether they are fully authorised, registered or EuVECA managers) and other Financial Market Participants. The Disclosure Regulation also imposes certain new reporting obligations on such Financial Market Participants.

Application in practice

In practice, the Disclosure Regulation and the Taxonomy Regulation establish the following requirements:

As of 10 March 2021:

    • All AIFMs must publish information on their policies that apply to the integration of sustainability risks in their investment decision-making process on their website.
    • All AIFMs must include descriptions of how sustainability risks have been integrated in their investment decisions and explain what kind of impact sustainability risks have on the returns of their investments or alternatively explain why sustainability risks have not been deemed relevant in their disclosures made under Article 23 of the AIFMD (the comply or explain principle).
    • All AIFMs must publish a statement regarding the adverse impacts investment decisions can have on sustainability factors or alternatively explain why such adverse impacts are not acknowledged on their website (“comply or explain”). However, if the AIFM has more than 500 employees, it must comply with the above mentioned requirement as of 30 June 2021 (i.e. “explain” will no longer be an option).
    • AIFMs must disclose information on how their remuneration policies are consistent with the integration of sustainability risks on their website. On the other hand, only fully authorised AIFMs (in Finnish “toimiluvallinen vaihtoehtorahaston hoitaja”) are subject to the remuneration rules established in the AIFMD.

As of 30 December 2022:

      • In the event that an AIFM takes into account the adverse impacts of investment decisions, it must include an explanation of whether and how the principal adverse impacts affecting sustainability factors have been taken into consideration and issue a statement that such information is available in the AIFMs annual reports in its disclosures made under Article 23 of the AIFMD.
      • In the event that the investment product (e.g. fund) does not take into account the criteria laid down in the Taxonomy Regulation, the following phrase must be included in the disclosures made under Article 23 of the AIFMD and in the annual reports of the fund: “The investments underlying this financial product do not take into account the EU criteria for environmentally sustainable economic activities.”

If the AIFM manages an AIF, which, within the meaning of the Taxonomy Regulation, has sustainable investments as its objective or promotes environmental or social characteristics, certain additional disclosure obligations apply. These additional obligations are significantly more demanding than the abovementioned requirements that apply to all AIFMs.

In the event that an AIFM offers investment advice in addition to fund management services, the AIFM will also be classified as a Financial Adviser under the Disclosure Regulation in addition to being considered a Financial Market Participant, and some additional requirements apply as a result.

AIFMs and other Financial Market Participants should, at minimum, go through their due diligence policies to review how sustainability risks are integrated in their investment process and to ensure that the required statements are included on their websites and in any disclosures made under Article 23 of the AIFMD. In addition, AIFMs should decide whether the adverse impacts of investment decisions will be taken into consideration and revise their websites to include the required statements. AIFMs should also review their remuneration policies to ensure that they are in line with the upcoming regulation. Finally, AIFMs must ensure that the necessary disclaimers are included in the disclosures made under Article 23 of the AIFMD in the event that the criteria laid down in the Taxonomy Regulation are not taken into consideration.

Borenius’ lawyers are available to assist in addressing any questions you may have regarding the new regulations or this legal alert.

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Additional information

Paulus Hidén



Johannes Piha



Eeva Terho