Asset Management & Investment Funds ESG Newsletter

Highlights during the period

In this latest edition of the Walkers ESG newsletter, we identify a number of key highlights from European legislative and regulatory developments and advances in the global sustainable finance framework more broadly.

Central Bank feedback report on ESMA's Common Supervisory Action on the integration of sustainability risks and related disclosures in the investment fund sector.

The Central Bank has published its Feedback Report (the Report) setting out findings and expectations from the ESMA-led CSA on the integration of sustainability risks and related disclosures in the investment fund sector. The review covered UCITS management companies and AIFMs and assessed governance, sustainability risk integration and monitoring, data usage, and the quality and consistency of SFDR disclosures at entity and product level. The Report communicates the Central Bank's findings and expectations arising from the CSA as well as outlining the Central Bank's supervisory expectations for entities subject to SFDR.

Further detail can be found in section 1.1 of the newsletter.

European Supervisory Authorities (ESAs) Q&As clarifying the practical application of specific measures under SFDR and SFDR Delegated Regulation

The Q&As will be of interest to financial market participants in relation to the preparation of the principal adverse impact statements, pre-contractual product disclosures and financial product disclosures.

Further detail can be found in section 1.2 of the newsletter.

ESAs annual report on entity and product-level principal adverse impact disclosures under SFDR

The Joint Committee of the ESAs published its fourth annual report on PAI disclosures under SFDR. The report sets out good and below average disclosures practices identified by the ESAs based both on NCAs' observations and the ESAs' own desk-based analysis as well as recommendations to the Commission for its comprehensive assessment of the SFDR. Further detail can be found in section 1.3 of the newsletter.

ESMA final report on technical standards under the ESG Ratings Regulation (EU) 2024/3005

Ahead of application of the new framework for ESG ratings providers in July 2026, ESMA submitted its draft regulatory technical standards (RTS) for adoption by the Commission under the regulation on the transparency and integrity of ESG rating activities.

Further detail can be found in section 3.3 of the newsletter.

1. SDFR-related developments

1.1 Central Bank of Ireland (the Central Bank) feedback report on ESMA's Common Supervisory Action on the integration of sustainability risks and related disclosures in the investment fund sector (the CSA)

On 23 October 2025, following publication of ESMA's report on the 2023-2024 CSA, conducted with the Central Bank and other EU competent authorities on sustainability risks and SFDR disclosures, the Central Bank published its feedback report on the CSA (CBI Report).

The CBI Report aims to communicate the Central Bank's findings and observations from the CSA as well as outlining the Central Bank's supervisory expectations for entities subject to SFDR including Central Bank authorised alternative investment fund managers (AIFMs) and UCITS management companies (Firms) in respect of their disclosure obligations under Articles 6, 8 and 9 of SFDR.

Overall, the Central Bank noted satisfaction that its findings, following the conclusion of the CSA, are broadly in line with regulatory expectations and that entities demonstrated an appetite to comply with the requirements of SFDR.

However, the CBI Report identifies areas that require a marked improvement, particularly relating to on-going monitoring processes and the quality of certain SFDR disclosures. As part of the CSA, the Central Bank utilised a proprietary ESG dashboard tool to assess the SFDR disclosures contained in a number of funds and ensure that the pre-contractual disclosures are consistent with the relevant fund's portfolio. The CBI Report confirms that the ESG dashboard tool can be used on a fund specific, firm specific or environmental specific basis and will be used as a supervisory tool by the Central Bank on an ongoing basis.

In this regard, the CBI Report confirms that the Central Bank issued several risk mitigation programmes (RMPs) to relevant Firms to address firm-specific findings and the contents of these RMPs have reflected some of the findings, expectations and actions outlined in the CBI Report which we have highlighted below.

Sustainability risk integration and monitoring

Findings

• SFDR control framework – The CBI Report notes that while some Firms have designed robust and effective delegate oversight and control frameworks to support proactive and consistent sustainability risk monitoring across all the funds under management, this was not the case in all circumstances. Varying approaches to sustainability risk integration and monitoring identified by the Central Bank include:
  • quarterly and ad-hoc sustainability risk reporting to the board and relevant sub-committees;
  • the production of sustainability risk dashboards;
  • inclusion of sustainability risk as an item in management frameworks; and
  • integrating sustainability risk into the three lines of defence.
• Oversight - While some Firms had clearly dedicated significant resources to oversight and monitoring, the Central Bank is concerned about the limited levels of oversight coverage some Firms have across their fund ranges.
• Overreliance on delegate attestations – The CBI Report notes the inconsistent use of attestations whereby a Firm receives a confirmation from its delegate attesting that the underlying fund portfolio is compliant with the criteria relating to the Article 8 / Article 9 requirements. In a number of circumstances, the Central Bank found a lack of information provided to justify the view in the attestation. This resulted in firms being unable to demonstrate how they were satisfied that the information in the attestation was correct.

Expectations

The CBI Report notes that firms should have a documented, robust and effective control framework in place to ensure SFDR compliance. This control framework should include effective ongoing due diligence of funds, data and delegates combined with consistent independent monitoring carried out across all funds. Firms should ensure the information provided as part of delegate attestations contain necessary details to actively assess fund compliance. Firms should also continue to monitor their level of resourcing, skills, knowledge and expertise on an ongoing and proportionate basis in respect of their funds in scope of Articles 6, 8 and 9.

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