February 3, 2022

Mr. Alain Deckers, Head of Unit
Mr. Lukas Bortel, Chief Legal Officer
European Commission
DG FISMA, Directorate Financial Markets, Unit C4

Via e-mail

Re: Application of SFDR entity-level rules to Article 42 AIFMs

Dear Mr. Deckers and Mr. Bortel:

The Asset Management Group of the Securities Industry and Financial Markets Association (“SIFMA AMG”) brings the asset management community together to provide views on U.S. and global policy and to create industry best practices. SIFMA AMG’s members represent U.S. and global asset management firms whose combined assets under management exceed $45 trillion. The clients of SIFMA AMG member firms include, among others, tens of millions of individual investors, registered investment companies, endowments, public and private pension funds, UCITS and private funds such as hedge funds and private equity funds. For more information, visit http://www.SIFMA AMG.org/amg.

Our members are active participants in the sustainability journey and have first-hand experience of implementing sustainability related practices and disclosures within the asset management sector – including the EU Sustainable Finance Disclosure Regulation (“SFDR”) regime.

We are writing to the European Commission (the “Commission”), as we understand that the EU authorities are considering publishing guidance that would bring non-EU alternative investment fund managers (“AIFMs”) marketing their funds in the EU pursuant to Article 42 of EU Directive 2011/61/EU (“AIFMD”), in scope of the SFDR entity-level requirements. We note that since the implementation of SFDR on 10 March 2021, the market position has been that non-EU AIFMs should only be subject to the product level SFDR obligations for any alternative investment funds (“AIFs”) they market in Europe under Article 42 of AIFMD, and not to any SFDR entity level obligations (in particular, the obligation to consider and report against principal adverse sustainability impacts). The Commission’s SFDR Q&As (6 July 2021) did not appear to conclusively opine on the matter as while confirming that the SFDR product level obligations apply to non-EU AIFMs, it stated that “AIFM must ensure compliance with [SFDR], including the financial product related provisions”. No specific mention was made of the entity level SFDR requirements. We understand that the Commission has since had a meeting with an industry group and the European Supervisory Authorities (“ESAs”), where it was stated that the Commission’s view was that SFDR applied to non-EU AIFMs at both an entity and product level. This view had not previously been communicated to market participants, and we are aware that a number of National Competent Authorities (“NCAs”) were, like SIFMA AMG members, only made aware of this view upon the distribution of the minutes of the meeting.