ESAs to Publish Regulatory Standards Under SFDR at a Later Stage
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
Featured Experts
Michael Denton, PhD, PE
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.
James Partridge
Credit analytics expert helping clients understand, develop, and implement credit models for origination, monitoring, and regulatory reporting.
Previous Article
EC Approves Prolongation of Guarantee Scheme for Banks in GreeceRelated 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.
