In a recent announcement, EC highlighted that the Sustainable Finance Disclosure Regulation, or SFDR, comes into effect on March 10, 2021. EC also announced that SFDR will be accompanied by regulatory technical standards, which are being jointly developed by ESAs and will be applicable at a later stage. The SFDR will set common EU rules on how financial product manufacturers and financial advisers should inform end-investors about sustainability risks, how the impact of investments on the environment and society should be disclosed, and how financial products that are marketed as sustainability-related actually meet that ambition.
SFDR, which is claimed to be the cornerstone of the EC action plan on sustainable finance, aims to trigger changes in behavioral patterns in the financial sector, discourage greenwashing, and promote responsible and sustainable investments. First proposed by EC in May 2018, these new rules will strengthen and improve how sustainability-related information is disclosed in the financial sector. This enhanced transparency will increase awareness of financial products' sustainability credentials. While there is growing recognition of the importance of sustainability and awareness of climate-related risks and opportunities, the type of information provided to investors in the financial sector has been limited up until now and requirements have often differed across member states. These rules are part of the EU efforts under the Sustainable Development Agenda and Carbon Neutrality Agenda as well as its commitment to the Paris agreement, to ensure that the financial sector throws its full weight behind the fight against climate change.
Related Link: News Release
Keywords: Europe, EU, Banking, Securities, SFDR, ESG, Sustainable Finance, Climate Change Risk, Regulatory Technical Standards, Disclosures, EC
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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