Featured Product

    ESAs Propose New Rules for Taxonomy-Related Product Disclosures

    October 25, 2021

    The European Supervisory Authorities (ESAs) have delivered to the European Commission (EC) the final report on the draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR), as amended by the regulation on the establishment of a framework to facilitate sustainable investment. The disclosures relate to financial products that make sustainable investments contributing to environmental objectives. EC will scrutinize the draft regulatory technical standards and decide whether to endorse them within three months of their publication. EC informed the European Parliament and Council that it intends to incorporate all the technical standards, meaning both the original ones submitted to EC in February 2021 as well as the ones covered in this final report, in one instrument.

    The draft regulatory technical standards contain templates for pre-contractual and periodic product disclosures. ESAs agreed to amend the existing finalized draft regulatory technical standards and their accompanying templates to minimize duplication and complexity, thus creating a single ruleset. The ESAs’ finalized draft regulatory technical standards, which were published on February 04, 2021, have already established the content, methodology, and presentation of other disclosures to be made under the SFDR in accordance with the ESAs’ empowerments under Articles 2a, 4(6) and (7), 8(3), 9(5), 10(2), and 11(4) of SFDR. The ESAs’ aim is to have the technical standards on disclosures rules function as a “single rulebook” for sustainability disclosures for both the original empowerments in the SFDR and the additional ones added by taxonomy regulation. The draft standards aim to provide disclosures to end-investors regarding the investments of financial products in environmentally sustainable economic activities, providing them with comparable information to make informed investment choices; another aim is to establish a single rulebook for sustainability disclosures under the SFDR and the Taxonomy Regulation. The report contains following proposals for products under Articles 5 and 6 of the Taxonomy Regulation:

    • inclusion of pre-contractual and periodic disclosures that identify the environmental objectives to which the product contributes and show how, and to what extent, the product’s investments are aligned with the EU Taxonomy
    • for measuring how, and to what extent, activities funded by the product are aligned with the EU taxonomy; the proposals consist of two elements—two graphs showing the taxonomy-alignment of investments of the financial product based on a specified methodology that calculates that alignment and an assurance provided by an auditor or a review by a third party that the economic activities funded by the product that qualify as environmentally sustainable are compliant with the detailed criteria of the Taxonomy Regulation.

    The proposal for pre-contractual and periodic disclosures involves inclusion of annexes with amendments to the mandatory templates for financial products that promote environmental and/or social characteristics or a sustainable investment objective as defined in the SFDR, so that they include additional disclosures for Article 5 and Article 6 products under the Taxonomy Regulation. Regarding the issue of treatment of sovereign bonds in the representation of the taxonomy-alignment of investments, ESAs decided to require the disclosure of the taxonomy-alignment of investments in two ways: one by including sovereign exposures and the other by excluding sovereign exposures from the calculation. To protect investors from risk of greenwashing, the draft regulatory technical standards contain a graph that includes all investments of the financial product in the calculation. As there is no appropriate methodology to assess the taxonomy-alignment of sovereign bonds, ESAs added a second graph showing the taxonomy-alignment of the financial product where all sovereign exposures are excluded from the calculation.

     

    Related Links

    Keywords: Europe, EU, Banking, Regulatory Technical Standards, SFDR, Sustainable Finance, Taxonomy Regulation, Disclosures, Single Rulebook, ESAs

    Related Articles
    News

    EBA Proposes Standards for IRRBB Reporting Under Basel Framework

    The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.

    January 31, 2023 WebPage Regulatory News
    News

    FED Issues Further Details on Pilot Climate Scenario Analysis Exercise

    The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.

    January 17, 2023 WebPage Regulatory News
    News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News
    News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News
    News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News
    News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News
    News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News
    News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News
    News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News
    News

    ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite

    The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.

    December 22, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8699