EC Issues Legislative Proposals on Sustainable Finance in EU
EC presented a package of measures as a follow-up to its action plan on financing sustainable growth. The package includes proposals aimed at establishing a unified EU classification system of sustainable economic activities (taxonomy); improving disclosure requirements on how institutional investors integrate environmental, social, and governance (ESG) factors in their risk processes; and creating a new category of benchmarks that will help investors compare the carbon footprint of their investments. EC also proposed to amend certain Delegated Acts under the Markets in Financial Instruments Directive (MiFID II) and the Insurance Distribution Directive (IDD). The comment period for the proposal for a regulation amending Regulation (EU) 2016/1011 on low carbon benchmarks and positive carbon impact benchmarks consultations closes on July 20, 2018 while comment period on some other proposals closes on June 21, 2018.
The following are the key features of the proposed measures:
- The proposal for a unified EU classification system sets harmonized criteria for determining whether an economic activity is environmentally-sustainable. Step by step, EC will identify activities that qualify as "sustainable," taking into account the existing market practices and initiatives and drawing on the advice of a technical expert group that is being set up.
- The proposed regulation related to investor duties and disclosures will introduce consistency and clarity on how institutional investors, such as asset managers, insurance companies, pension funds, or investment advisers should integrate environmental, social, and governance (ESG) factors in their investment decision-making process. Exact requirements will be further specified through Delegated Acts, which EC will adopt at a later stage.
- The proposed rules on low-carbon benchmarks will create a new category of benchmarks, comprising the low-carbon benchmark or "decarbonized" version of standard indices and the positive-carbon impact benchmarks. This new market standard should reflect companies' carbon footprint and give investors greater information on an investment portfolio's carbon footprint.
- EC launched a consultation to assess how best to include ESG considerations into the advice that investment firms and insurance distributors offer to individual clients. The aim is to amend Delegated Acts under MiFID II and IDD. When assessing if an investment product meets their clients' needs, firms should also consider the sustainability preferences of each client, according to the proposed rules.
Related Links
Comment Due Date: July 20, 2018
Keywords: Europe, EU, Banking, Securities, Sustainable Finance, Taxonomy, Disclosure Requirements, EC
Previous Article
HKMA Publishes Rules on Equity Exposure Limits for BanksRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
