Featured Product

    ISDA and AFME Respond to EC Consultations on Climate Benchmarks

    May 06, 2020

    ISDA and the Association for Financial Markets in Europe (AFME or Associations) issued a response to EC consultations on three draft delegated acts that specify requirements of EU Climate Transition Benchmarks and EU Paris-aligned benchmarks. From a standard-setting perspective, the Associations welcome the proposed Carbon Benchmark requirements, as the proposals include vital elements necessary for creating standard templates while allowing some degree of flexibility to benchmark administrators. An EU standardized climate benchmarks framework would undoubtedly result in a less fragmented landscape on the data provision front for all market participants. In addition to specific comments on the three draft delegated acts, the Associations also emphasize a few general concerns of their members in relation to the approach of EC to specifying requirements in the relevant Level 2 legislation.

    The EC consultations being referred to are the draft delegated acts on:

    • Establishing minimum standards for EU Climate Transition Benchmarks and Paris-aligned Benchmarks (Delegated Act on EU Climate Transition Benchmarks).
    • Minimum content of the explanation on how environmental, social, and governance (ESG) factors are reflected in the benchmark methodology (Delegated Act on Benchmark Methodology)
    • The explanation in the benchmark statement of how ESG factors are reflected in each benchmark provided and published (Delegated Act on Benchmark Statement).

    The Associations stressed that the requirements suggested in the draft delegated act in relation to ESG disclosures in the benchmark statement and the related Annexes do not fully take into account market practices in relation to maintenance of benchmark statements. In the event that benchmark administrators would not have flexibility to deviate from the suggested template for the benchmark statement, they will have to endure disproportionate costs to apply the suggested template for all benchmarks and families of benchmarks. The Associations are of the view that the suggested approach would strongly discourage benchmark administrators from providing ESG benchmarks and would, therefore, run contrary to the objective of the Regulation, which is to mainstream the provisions of ESG benchmarks. In this context, it is important to note that significant channeling of financial resources into sustainable economic activities will only occur if a wide variety of benchmark administrators are incentivized to market EU Climate Transition and EU Paris-aligned Benchmarks.

    The Associations encourage EC to set out a clear definition of “ESG objectives” to ensure that all ESG-labeled benchmarks meet a minimum standard of what is considered ESG, in addition to the underlying factor disclosures. The Associations note that the draft Delegated Act on Benchmark Methodology lists "Commodity benchmarks" in its Article 1(3)(f). However, Title II of the Benchmarks Regulation, with the exception of Article 10, does not apply to commodity benchmarks as specified in Article 19(1) of the Benchmarks Regulation. Therefore, the Associations requested EC to remove Article 1(3)(f) from the final Delegated Act on Benchmark Methodology. The Associations support the efforts of EC to close the gap between required data resulting from all relevant sustainable finance legislation but would also urge EC to allow more flexibility for benchmark administrators, until relevant data points become comparable and accessible under affordable cost structures. The Associations also specified that proportionality is needed in relation to ESG disclosures and requested further clarification in relation to asset class differentiation.

     

    Related Link: Response to EC (PDF)

     

    Keywords: Europe, EU, Banking, Insurance, Securities, ESG, Climate Benchmarks, Climate Change Risk, Sustainable Finance, Benchmarks Regulation, Delegated Act, Climate Transition Benchmarks, Paris Agreement, AFME, EC, ISDA

    Related Articles
    News

    FED Revises Capital Planning and Stress Testing Requirements for Banks

    FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.

    January 19, 2021 WebPage Regulatory News
    News

    ECB Releases Results of Bank Lending Survey for Fourth Quarter of 2020

    ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.

    January 19, 2021 WebPage Regulatory News
    News

    ESAs Publish Reporting Templates for Financial Conglomerates

    ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.

    January 18, 2021 WebPage Regulatory News
    News

    EBA Publishes Report on Asset Encumbrance of Banks in EU

    EBA published the annual report on asset encumbrance of banks in EU.

    January 18, 2021 WebPage Regulatory News
    News

    MAS Revises Guidelines on Technology Risk Management

    MAS revised the guidelines that address technology and cyber risks of financial institutions, in an environment of growing use of cloud technologies, application programming interfaces, and rapid software development.

    January 18, 2021 WebPage Regulatory News
    News

    US Agencies Publish Updates for Call Reports, FFIEC 101, and FR Y-9C

    FED updated the reporting form and instructions for the FR Y-9C report on consolidated financial statements for holding companies.

    January 15, 2021 WebPage Regulatory News
    News

    EBA Proposes Guidelines for Establishing Intermediate Parent Entities

    EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive.

    January 15, 2021 WebPage Regulatory News
    News

    EC Adopts Financial Reporting Changes Arising from Benchmark Reforms

    EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.

    January 14, 2021 WebPage Regulatory News
    News

    BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk

    BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.

    January 14, 2021 WebPage Regulatory News
    News

    HMT Updates List of Post-Brexit Equivalence Decisions in UK

    HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.

    January 14, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6462