ESMA issued a no-action letter to promote coordinated action by national competent authorities regarding the new environmental, social and governance (ESG) disclosure requirements for benchmark administrators, under the Benchmarks Regulation. According to the letter, national competent authorities should not prioritize supervisory or enforcement action against administrators regarding these new requirements until the delegated acts apply. ESMA also issued an opinion to EC on the need for prompt adoption of the relevant delegated acts. The new requirements are due to apply on April 30, 2020 and require benchmark administrators to include details of how ESG factors are reflected in their methodology documents and benchmark statements.
The new ESG-related disclosure requirements oblige benchmark administrators, by April 30, to include:
- in their methodology document, an explanation of how the key elements of the methodology reflect ESG factors for each benchmark or family of benchmarks
- in their benchmark statement, an explanation of how ESG factors are reflected in each benchmark or family of benchmarks provided and published.
These disclosure requirements that have been set out in the EU Regulation 2016/1011 aim to increase the comparability of benchmarks with regard to ESG factors and are key for users of benchmarks to make well-informed choices. The associated delegated acts are expected to ensure that these objectives may be achieved by setting out the minimum content of the ESG factors to be disclosed as well as the standard formats for the presentation of that information.
EC, on April 08, 2020, had published the draft delegated acts, the consultation period for which ends on May 06, 2020. Following their adoption, the delegated acts will be subject to a scrutiny period by the European Parliament and by the Council before they enter into force. In its opinion to EC, ESMA states that it considers it necessary for national competent authorities to address the absence of the delegated acts through consistent risk-based supervisory and enforcement practices. ESMA explained that if the date of application of the new disclosure requirements had been aligned with the date of application of the delegated acts, significant issues would not have arisen. ESMA asserted that the delegated acts should be adopted by EC without delay, to ensure the objectives of these requirements are achieved, to provide administrators with clarity on how to apply these requirements, and to provide competent authorities with clarity on how to supervise compliance with these requirements.
Keywords: Europe, EU, Banking, Securities, ESG, Benchmarks Regulation, Opinion, National Competent Authorities, Delegated Act, Disclosures, Benchmark Administrator, Climate Change Risk, ESMA
Next ArticleESRB Reviews Macro-Prudential Policy in EU in 2019
The European Commission (EC) announced plans to defer the application of 13 regulatory technical standards under the Sustainable Finance Disclosure Regulation (2019/2088) by six months, from January 01, 2022 to July 01, 2022.
The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.
The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.
Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.
The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.
The European Banking Authority (EBA) published its annual report on asset encumbrance in banking sector.
The European Banking Authority (EBA) published a methodological guide to mystery shopping.
The Australian Prudential Regulation Authority (APRA) released a letter to authorized deposit-taking institutions to provide an update on key policy settings for the capital framework reforms, which will come into effect from January 01, 2023.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a report that assesses the business continuity planning activities of financial market infrastructures or FMIs.
The European Securities and Markets Authority (ESMA) has responded to the IFRS consultation on targeted amendments to the IFRS Foundation constitution to accommodate an International Sustainability Standards Board (ISSB) to set IFRS Sustainability Standards.