CSSF Guides on SFDR Implementation, Reviews Issuer Climate Disclosures
CSSF published a communication guiding investment fund managers of undertakings for collective investment in transferable securities (UCITS) and alternative investment funds to comply with the requirements of the EU Regulation 2019/2088 on sustainability-related disclosures in the financial services sector (also known as SFDR). The communication highlights that investment fund managers will need to comply with the high-level, principle-based requirements laid down in the SFDR by March 10, 2021. Additionally, CSSF published results of its assessment of the status of climate-related information reported by issuers. The review not only revealed some improvements in disclosures but also highlighted significant gaps and scope for improvements.
The review of reported climate-related information compares the climate-related disclosures of issuers with the recommendations in the updated EU guidance on climate-related disclosures. The review revealed that key improvements relate to the information provided on policies and due diligence processes, disclosures on risk management of climate-related risks, and key performance indicators. However, the review also highlighted that significant gaps remain and that additional improvements in the quality and comparability of climate-related disclosures are urgently required to meet investor and other stakeholder needs. The following are the key highlights of the review:
- Only a small and unsatisfactory percentage of issuers address the questions in relation to climate-change beyond the basic requirements of the NFI Directive (Directive 2014/95/EU).
- While the importance of climate-change effects is relatively well highlighted in the description of business models (for those disclosing climate-related information), there is lack of information about concrete actions beyond commitments made or proposals to significantly reduce global warming.
- There is an omission with respect to the insights on governance aspects, including the board’s oversight of climate-related risks and opportunities and the management’s role in assessing and managing these risks and opportunities, along with the information provided on policies and due diligence processes. Therefore, the review identified a clear need for improvement in future non-financial reports, as it allows stakeholders to understand the robustness of the company’s approach to climate-related issues.
- There is a lack of disclosures on risk management in relation to climate-related risks (identification/assessment/mitigation) in the short, medium, and long term for a large majority of issuers. There is also a significant need for disclosures in relation to the key climate-related risks, distinguishing physical and transition risks.
CSSF recommends issuers willing to achieve a better non-financial reporting to proactively monitor the Taxonomy Regulation developments. CSSF urges issuers to review the updated EU guidance that provides practical recommendations on how to better report the impact that their activities have on the climate as well as the impact of climate change on their business. Issuers are expected to exercise their own judgment when deciding which disclosures to use. In 2021, CSSF will conduct a follow-up of this assessment and of the European priorities, to continue providing issuers with recommendations and good practices.
Related Links
Keywords: Europe, Luxembourg, Banking, Securities, Climate Change Risk, ESG, Governance, SFDR, Sustainability-Related Disclosures, Sustainable Finance, CSSF
Previous Article
IOSCO Responds to IFRS Consultation on Sustainability ReportingRelated Articles
FDIC Proposes Amendments to Real Estate Lending Standards
FDIC is seeking comments on a rule to amend the interagency guidelines for real estate lending policies—also known as the Real Estate Lending Standards.
MAS Amends Notices on Risk-Based Capital Adequacy Requirements
MAS revised Notices 637 and 1111 on the risk-based capital adequacy requirements, along with Notice 656 on the exposures to single counterparty groups for banks incorporated in Singapore.
ISDA Consults on Implementation of Fallbacks for Certain Swap Rates
ISDA is consulting on the implementation of fallbacks for the sterling LIBOR ICE Swap Rate and for the USD LIBOR ICE Swap Rate.
US Agencies Set Out Unified Agenda for Planned Regulatory Actions
SEC announced that the Office of Information and Regulatory Affairs released the Spring 2021 Unified Agenda of Regulatory and Deregulatory Actions.
BIS and BoE Launch Innovation Hub in London
BIS and BoE launched the BIS Innovation Hub Center in London, which is the fourth new Innovation Hub Centre to be opened in the past two years.
ESRB Recommends Reciprocation of Certain Macroprudential Measures
ESRB published recommendations on the reciprocation of macro-prudential measures in Belgium, France, Luxembourg, Norway, and Sweden.
MAS Amends Regulatory Notices Applicable to Banks in Singapore
MAS revised multiple notices that are applicable to banks and merchant banks in Singapore and have been issued pursuant to the Banking Act (Cap 19).
EC Publishes Regulation on Key Aspects of Implementation of SA-CCR
EC published the Delegated Regulation 2021/931, which supplements the Capital Requirements Regulation (CRR or Regulation 575/2013) with regard to the regulatory technical standards specifying the method for identifying derivative transactions with one or more than one material risk driver.
BCBS Consults on Prudential Treatment of Cryptoasset Exposures
BCBS is consulting on preliminary proposals for the prudential treatment of cryptoasset exposures of banks.
EBA Revises List of Validation Rules for Reporting
EBA issued a revised list of validation rules under the implementing technical standards on supervisory reporting.
