Sustainable Finance
Legislative and Regulatory Developments
In this section we bring together various legislative and regulatory initiatives that are relevant to sustainable finance generally. This section represents a collaborative approach between the three practice areas of Asset Management and Investment Funds, Finance and Capital Markets and Financial Services Regulation.
Sustainable finance continues to be a dominant theme for fund managers and we have considered a number of relevant initiatives in the Asset Management and Investment Funds section including the European Commission's review of SFDR Level 1, ESMA's Consultation on Funds' Names using ESG or Sustainability-related Terms and the ESAs' Consultation on SFDR Level 2.
In Finance and Capital Markets ESG investing is also of relevance and in that section we have also mentioned developments in relation to the EU Green Bond Standard.
EU DEVELOPMENTS
Regulation on the Establishment of a Framework to Facilitate Sustainable Investment – The Taxonomy Regulation
Date published: 22 June 2020
This regulation – known as the Taxonomy Regulation (Regulation (EU) 2020/852) - forms part of the package of reforms published by the Commission in 2018 relating to its Sustainable Finance Action Plan. The regulation on the establishment of a framework to facilitate sustainable investment establishes an EU-wide classification system or taxonomy intended to provide businesses and investors with a common language to identify to what degree economic activities can be considered environmentally sustainable. The regulation sets out uniform criteria for determining whether an economic activity is environmentally sustainable.
Applies from: The Taxonomy Regulation applied from 1 January 2022 with respect to activities that substantially contribute to climate change mitigation and adaptation. The regulation applies with respect to activities that substantially contribute to the other environmental objectives (sustainable use and protection of water and marine resources; transition to a circular economy; pollution prevention and control; protection and restoration of biodiversity and ecosystems) from 1 January 2023.
Article 8 of the Taxonomy Regulation requires additional disclosures from companies in scope of the non-financial reporting framework. Pursuant to the delegated act adopted under Article 8 of the Taxonomy Regulation, qualitative reporting by in-scope undertakings was required from 1 January 2022, with further requirements applicable to non-financial undertakings from 1 January 2023 and to financial undertakings from 1 January 2024.
See Corporate section.
EU DRAFT LEGISLATION
Proposed Regulation on ESG Rating Providers
Procedure reference: COM(2023)314 final
Date published: 13 June 2023
On 13 June 2023, the Commission published a proposal for a regulation on the transparency and integrity of ESG rating activities. The Commission noted that the ESG ratings market currently suffers from a lack of transparency and the Commission is aiming to improve the reliability and transparency of ESG ratings activities. New organisational principles and clear rules on the prevention of conflicts of interest will increase the integrity of the operations of ESG rating providers. The proposal will require that ESG rating providers offering services to investors and companies in the EU be authorised and supervised by ESMA. The proposal is intended to ensure the quality and reliability of their services to protect investors and ensure market integrity.
Latest stage: On 10 October 2023, the European Parliament's Economic and Monetary Affairs Committee ("ECON") published a draft report (dated 6 October 2023) on the Commission's legislative proposal setting out its suggested amendments.
Proposed Regulation on EU Standards for 'Green Bonds'
See Finance and Capital Markets section.
Proposal for a Corporate Sustainability Due Diligence Directive
See Corporate section.