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    ESAs Set Out SFDR Timelines; ESMA Issues Report on Carbon Market

    March 28, 2022

    The European Supervisory Authorities (ESAs) updated supervisory statement on application of the Sustainable Finance Disclosure Regulation (SFDR) while the European Securities and Markets Authority (ESMA) published report on the carbon market.

    The updated supervisory statement on SFDR sets out a new implementation timeline for various disclosure obligations in SFDR and the Taxonomy Regulation. The statement also sets out expectations about the explicit quantification of product disclosures under Articles 5 and 6 of the Taxonomy Regulation and the use of estimates. In this statement, which replaces the initial statement from February 2021, ESAs recommend that national competent authorities and market participants should use the interim period from March 10, 2021 to January 01, 2023 to prepare for the application of the forthcoming regulation containing the regulatory technical standards and apply the relevant measures of SFDR and the Taxonomy Regulation, as per the application dates outlined in the supervisory statement. Financial market participants and financial advisers are required to apply most of the provisions on sustainability-related disclosures laid down in the SFDR from March 10, 2021, while the application of the regulatory technical standards is delayed to a later date. The European Commission (EC) will endorse the ESAs' draft regulatory technical standards within three months of the publication.

    The report on the carbon market in European Union presents an in-depth analysis of the trading of emission allowances (EUA) and emission allowance derivatives based on data gathered from different sources. The analysis did not find any major deficiencies in the functioning of the carbon market based on the data available. However, ESMA’s analysis of the market has led it to put forward a number of policy recommendations to improve market transparency and monitoring. ESMA also identified two possible courses of actions that the European Commission could consider regarding the introduction of position limits on carbon derivatives and centralized market monitoring of the carbon market at the European Union level, in line with the ACER-style monitoring for gas and power. ESMA, based on its findings and observations, has formulated a number of policy recommendations on the transparency and monitoring of the carbon market from the securities regulators’ perspective—for instance:

    • extend position management controls to EUA derivatives
    • amend EUA position reporting
    • track chain of transactions in Markets in Financial Instruments Regulation regulatory reports
    • provide ESMA with access to primary market transactions


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    Keywords: Europe, EU, Banking, Securities, Insurance, SFDR, Sustainable Finance, Disclosures, RTS, Taxonomy Regulation, Carbon Markets, Low-Carbon Economy, ESG, MiFIR, Derivatives, ESMA, ESAs

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