Following the publication of ESMA’s report on its CSA on sustainability risks and disclosures earlier this year, the Central Bank of Ireland has now published its own report setting out its findings and expectations arising from the review it conducted as part of the CSA.
The Central Bank of Ireland (“Central Bank”) has published a report providing an overview of the review it carried out as part of the European Securities and Markets Authority (“ESMA”) common supervisory action (“CSA”) on sustainability risks and disclosures. ESMA published its own report following the CSA on 30 June 2025. Due to the Central Bank’s supervisory focus on sustainability risks and disclosures, the Central Bank has on this occasion prepared a detailed report, as opposed to a “Dear CEO letter”, as would have been prepared following previous CSAs. The findings from the CSA and the Central Bank’s review will inform future supervisory priorities.
Overview
Overall, the Central Bank found that fund management companies (“FMCs”) demonstrated an appetite to comply with the sustainable finance framework and positively engaged with the Central Bank throughout the review. While all FMCs have introduced process and controls to support sustainability risk monitoring, some FMCs need to develop these processes and controls further, to make them more robust and effective. There were instances where process were not documented and approved in a formalised manner. The issue of data availability was a common theme during the regulator’s engagements with FMCs. The Central Bank also found that the evolution of frameworks, briefings and guidance in this area has led to FMCs applying conservative methods to avoid the risk of non-compliance.
The Central Bank identified several areas for improvement relating to: (a) inconsistent sustainability risk integration and monitoring; (b) the quality of underlying data used to support effective sustainability risk integration and monitoring; (c) the reactive / proactive nature in with FMCs review controls to meet Sustainable Finance Disclosure Regulation (“SFDR”) regulation and guidance; and (d) FMCs’ appetite to continue to challenge the information contained in product and entity level disclosures to ensure that they are clear and transparent for investors.
The key findings and expectations of the Central Bank are set out in the table below.
| Theme | Findings | Expectations |
| a) Inconsistent sustainability risk integration and monitoring | Index-tracking funds: The CSA team noted that many FMCs rely heavily on index providers to ensure that the Article 8 or Article 9 SFDR funds are meeting the environmental and social characteristics being promoted by the investment strategy on an ongoing basis or their sustainable objective. It was noted that FMCs rely on the application of the methodology by the index providers following the initial due diligence performed by the fund on the index and the index provider.
Delegate attestations: In some instances, the Central Bank identified, in the context of the FMC’s completion of ongoing monitoring activities, an overreliance on delegate attestations. |
- The Central Bank’s expectation is that all FMCs have a documented, robust and effective control framework in place that ensures their funds under management comply with the requirements of SFDR.
- This should include effective ongoing due diligence of funds, data and delegates, combined with consistent independent monitoring carried out across all funds.
- FMCs should ensure the information provided as part of delegate attestations contains necessary details to actively assess fund compliance.
- FMCs should continue to monitor their level of resourcing, skills, knowledge and expertise on an ongoing basis relevant to the nature, scale and complexity of their funds in scope of Article 6, Article 8 and Article 9 SFDR.
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| b) Data Limitations |
- FMCs interpreted the same data sources differently, leading to inconsistent monitoring outcomes.
- Some FMCs do not always have the relevant data to perform detailed monitoring of every fund and in some instances, rely on information provided by delegates.
- A significant majority of funds disclosing under Article 8 or Article 9 SFDR have adopted a 0% minimum commitment to taxonomy-aligned investments. The rationale provided for such commitments was the lack of reliable and consistent data required to confidently report an appropriate level of minimum investment.
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- The CSA highlighted that, as data becomes more readily available and consistent, FMCs are more capable of enhancing their controls. Data constraints should be identified and considered in depth at the earliest stage of strategic planning and fund onboarding to ensure FMCs have the ability to fulfil their fund compliance monitoring obligations.
- FMCs are expected to perform appropriate due diligence on the data and data providers on an on-going basis to ensure the data used to substantiate the requirements of SFDR is accurate, reliable and up to date.
- FMCs should be in a position to document and verify the underlying data used to substantiate SFDR compliance in instances where FMCs are using attestations to conduct fund monitoring and oversight.
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| c) SFDR Disclosures |
- There is a need for enhanced transparency at product level. The Central Bank identified funds with vague language when describing the sustainable investment objective or the promotion of environmental or social characteristics. In some instances, there was a lack of specific metrics, thresholds, or key terms that could be quantifiably assessed.
- The Central Bank also identified inconsistent approaches applied to website disclosures. For example, some FMCs include links to index methodologies, and these may not always be accessible, while others include all relevant information on the webpage.
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- FMCs should have robust frameworks in place to ensure that the disclosures made to investors in accordance with SFDR are clear and not misleading.
- There should be clear and detailed disclosure regarding the binding elements used to attain each of the environmental or social characteristics promoted by the fund, or the sustainable investment objective.
- Where a fund applies exclusions as a binding element of the strategy, there should be clarity regarding the thresholds applied, what constitutes “involvement” or the ESG score that would result in a fund excluding certain companies from investment. There should be no option within the disclosure to dis-apply the binding element of the strategy.
- Where a fund tracks an index, the ESG criteria applied by the index should be detailed in the binding elements. It is not sufficient for a Firm to provide that tracking the performance of the index is the fund’s binding element. Finally, FMCs should keep such disclosures under regular review to ensure the accuracy of the content continues to align with these expectations.
- The Central Bank expects that FMCs have processes in place to regularly review and approve the language contained in pre-contractual, website and periodic disclosures to ensure that these are aligned and meet the requirements of the SFDR. These reviews should be documented and conducted periodically.
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| d) SFDR Regulations and Guidance |
- FMCs highlighted enhancements to specific guidance and criteria that would support a consistent application of certain elements of SFDR.
- FMCs communicated the need to adapt to changing guidance (eg, Q&A’s) as SFDR matures and that this has led to compliance challenges due to the need to revisit existing processes to reflect the changes.
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- The Central Bank acknowledges that there are varied interpretations of some of the key components of the SFDR framework. These interpretations have led to inconsistent sustainability processes being applied by FMCs and contributes to an increased risk of non-compliance and potential greenwashing.
- This inconsistency is also evident in the varied interpretations and applications of data and data methodologies that FMCs are using when substantiating the ESG components of their funds.
- The Central Bank acknowledges the European Commission’s plan to publish a proposed revision to SFDR. However, this review will take time to develop, finalise and implement. Therefore, FMCs should strive to be as clear and transparent as possible in applying SFDR, including considering how their disclosures will be understood by the end investor.
- FMCs should remain vigilant to the SFDR, and where updates to SFDR are implemented or additional supporting guidelines are published, ensure that these are considered appropriately and without delay to avoid instances of non-compliance.
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Next Steps
The Central Bank expects that FMCs review and consider the contents of this report, together with ESMA’s report on the CSA published in June. The Central Bank report should be discussed with the board and relevant personnel with each FMC to ensure that the observations and expectations outlined by the Central Bank are considered.
Please get in touch with your usual Asset Management and Investment Funds Department contact or any of the contacts listed in this publication should you require further information in relation to the material referred to in this update. Full details of the Asset Management and Investment Funds Department, together with further updates, articles and briefing notes written by members of the Asset Management and Investment Funds team, can be accessed at www.matheson.com.
