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 planned European Commission review of SFDR Level 1 later this year (see our commentary for more information), the 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 the fourth round of trilogue discussions on the proposed EU Green Bond Standard which is expected to take place in Q1 of 2023.
EU LEGISLATION
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.
The Commission has yet to adopt the technical screening criteria (Level 2 measures) with respect to the environmental objectives of 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. On 5 April 2023, the Commission published a consultation paper seeking input regarding the technical screening criteria. The deadline for responses was 3 May 2023.
Sustainable Finance: Commission Delegated Regulation amending the Sustainable Finance Disclosure Regulation Technical Standards
Date published: 17 February 2023.
This legislation (Commission Delegated Regulation (EU) 2023/363) introducing updated templates for pre-contractual and periodic disclosures under the SFDR applies from 20 February 2023. The updated templates, which are set out in annexes to the SFDR Level 2 regulation, have been amended to include disclosures relating to investments in nuclear and gas activities under the EU Taxonomy Regulation. The Central Bank introduced a fast-track filing process in relation to the updated annexes and has clarified that existing funds are expected to update their pre-contractual disclosures "as soon as possible and at the earliest available opportunity". No deadline for filings under the fast track process has been set by the Central Bank.
Latest stage: On 12 April 2023, the European Supervisory Authorities ("ESAs") published a consultation paper proposing amendments to the RTS on principal adverse impacts ("PAI") and financial product disclosures under the SFDR. The deadline for responses to this consultation is 4 July 2023. See the Asset Management and Investment Funds section for more information.
For more information, read our briefing note Updated SFDR Templates: The Central Bank Filing Process
CSRD: Directive Amending the Non-Financial Reporting Directive as regards Corporate Sustainability Reporting
See Corporate section.
EU DRAFT LEGISLATION
Proposed Regulation on EU Standards for 'Green Bonds'
See Finance and Capital Markets section for an update on this legislation as well as additional commentary here.
EU CONSULTATIONS
Consultation on Funds' Names using ESG or Sustainability-related Terms
This initiative was discussed in our Spring Tracker. For further commentary see here.