EC welcomed the political agreement reached by the European Parliament and EU member states on new rules on disclosure requirements related to sustainable investments and sustainability risks. The new regulation sets out how financial market participants and financial advisers must integrate environmental, social, or governance (ESG) risks and opportunities in their processes, as part of their duty to act in the best interest of clients. The regulation requires the disclosure of adverse impact on ESG matters, such as in assets that pollute water or devastate bio-diversity, to ensure the sustainability of investments.
The regulation also sets uniform rules on how those financial market participants should inform investors about their compliance with the integration of ESG risks and opportunities. The availability of information is crucial to the integration of risks related to the impact of ESG events on the value of investments. The new regulation is built around three main pillars:
- Elimination of greenwashing (unsubstantiated or misleading claims about sustainability characteristics and benefits of an investment product) and an increase of market awareness on sustainability matters
- Regulatory neutrality—The rules introduce a disclosure toolbox to be applied in the same manner by different financial market operators. ESAs, and in particular the Joint Committee of the Authorities, will ensure further convergence and harmonization of disclosures in all the sectors concerned.
- Level playing field—The regulation covers investment funds; insurance-based investment products (life insurance products with investment components available as individual retail life policies as well as group life policies); private and occupational pensions and individual portfolio management; and both insurance and investment advice.
First proposed by EC in May 2018 as part of the Sustainable Finance Action Plan and the Capital Markets Union, these rules are an integral part of the EU efforts, under the sustainable development agenda and the carbon neutrality agenda of EU, to connect finance with needs of the real economy. They also support the 2012 United Nations' Sustainable Development Goals and the 2016 Paris Climate Agreement targets.EC is working with the co-legislators with the objective to reach an agreement on the remaining part of the package: EC proposal to establish a unified EU classification system (or taxonomy) of sustainable economic activities.
Keywords: Europe, EU, Banking, Insurance, Securities, Sustainable Finance, ESG, Disclosures, ESAS, EC
Previous ArticleRavi Menon of MAS on Ongoing Blockchain Projects of the Authority
BoE published a statistical notice (Notice 2020/9) explaining the approach for treatment of payment holidays on the profit and loss return or Form PL.
BoE updated the known issues document for the statistical reporting Forms AS and FV.
BIS published an update on the G20 TechSprint Initiative, which was launched in April 2020 and aims to highlight the potential for technologies to resolve regulatory compliance (regtech) and supervisory (suptech) challenges.
FED announced individual capital requirements for 34 large banks and these requirements go into effect on October 01, 2020.
SRB published a set of documents to give operational guidance to banks on implementation of the bail-in tool.
OSFI published a letter that provides an update on the milestones for the implementation of the IFRS 17 standard on insurance contracts.
EBA updated the report on the implementation of selected COVID-19 policies.
The Financial Stability Institute (FSI) of BIS published a brief note that examines the supervisory challenges associated with certain temporary regulatory relief measures introduced by BCBS and prudential authorities in response to the COVID-19 pandemic.
BCBS is consulting on the principles for operational resilience and the revisions to the principles for sound management of operational risk for banks.
BoE updated the reporting template for Form ER as well as the Form ER definitions, which contain guidance on the methodology to be used in calculating annualized interest rates.