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    EC Addresses ESAs on Application of Rule on Sustainability Disclosures

    October 29, 2020

    In a letter to ESAs, EC addressed the application of Regulation 2019/2088 on the sustainability-related disclosures in the financial services sector and the related technical standards. The co-legislators had agreed in March 2019 on an ambitious timeframe for the Regulation 2019/2088, requiring the joint development by ESAs of most of the draft regulatory technical standards by December 30, 2020 and the application of the provisions of Regulation 2019/2088from March 10, 2021. However, in view of the ongoing pandemic, EC is extending the deadline for public consultation of the draft regulatory technical standards for the application of this regulation. Nevertheless, the application of the regulation is not conditional on the formal adoption and entry into force or application of the regulatory technical standards, as the regulation lays down, at Level 1, the general principles of the sustainability-related disclosures.

    With regard to the integration of sustainability risks in the investment decision‐making process, financial market participants must, in accordance with the applicable sectoral legislation, already consider sustainability risks in their internal processes. Regulation 2019/2088 requires transparency in this respect, with no further details necessary in the regulatory technical standards. In relation to the transparency of adverse sustainability impact, numerous financial market participants currently comply with the non-financial reporting requirements under Directive 2013/34/EU or adhere to international standards and might consider using that information. Even without the full regulatory technical standards, no impediments exist to compliance by financial market participants and financial advisers with the Level 1 requirements laid down in Regulation 2019/2088.

    Therefore, all application dates are being maintained as laid down by Regulation 2019/2088 with effect from 2021. Thus, financial market participants and financial advisers subject to the regulation will need to comply with its high-level and principle-based requirements from that time. To provide financial market participants and financial advisers adequate time for implementation, the regulatory technical standards will become applicable at a later stage. This will also allow national competent authorities, as designated in accordance with the sectoral legislation referred to in Article 6(3) of Regulation 2019/2088 and in accordance with the Capital Requirements Directive (2013/36/EU), to prepare for the orderly and effective supervision of compliance by financial market participants and financial advisers with the requirements of the framework. EC is ready to coordinate with ESAs and national competent authorities on this approach and a number of trade associations in the financial services sector have indicated that they have initiated targeted actions to assist their membership with implementation.

     

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    Keywords: Europe, EU, Banking, Insurance, Securities, ESG, COVID-19, Regulation 2019/2088, Disclosures, Climate Change Risk, Sustainable Finance, CRD, ESAs, EC

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