On 1 September ISDA responded to the ESA’s Joint Consultation Paper on ESG disclosures under SFDR. In summary, ISDA members would prefer to include a separate section on information on how the use of derivatives meets each of the environmental or social characteristics or sustainable investment objectives promoted by the financial product, under Articles 19 and 28 of the RTS. This relates to the role of derivatives as a risk-management tool, requiring that disclosures in relation to the ‘use of derivatives’ should be different than disclosures for other financial products such as equities and bonds as otherwise this could lead to confusion for investors. For example, derivatives may be used in an ESG fund to hedge against currency and interest rate risks, with the derivatives themselves not having a sustainable investment objective. Furthermore, ISDA endorses the views expressed by AIMA/MFA that the ESAs should consider whether the opt-in regime for principal adverse impacts (PAI) should be more nuanced and allow smaller financial market participants to opt-in based on subsets of the 32 indicators in considerations, rather than allowing only for a binary choice between no PAI considerations and the full disclosure of 32 indicators.