The following posts provide a snapshot of selected UK, EU and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.
-
Mansion House 2024
November 14, 2024
Rachel Reeves, the U.K. Chancellor has set out a package of reforms in her Mansion House speech. The reforms aim to drive growth and competitiveness in financial services. Ms. Reeves stated that the regulatory changes post-financial crisis created a system which sought to eliminate risk-taking that 'has gone too far' and has led to unintended consequences. Ms. Reeves hopes to maintain the U.K.'s high regulatory standards while rebalancing elements of the regulatory system to drive economic growth and competitiveness. The package includes:- A proposed Financial Services Growth and Competitiveness Strategy
- Further reforms to the U.K.'s wholesale markets framework
- A new Payments Vision
- Confirmation of the introduction of PISCES
- A consultation on a proposed U.K. Green Taxonomy
- Confirms that the provision of ESG ratings will be brought within the scope of the U.K. regulatory perimeter
- Potential credit union common bond reform
-
Mansion House: Response to Consultation on Future Regulatory Regime for ESG Ratings Providers
November 14, 2024
Following its consultation, HM Treasury has published its response to the consultation on the future regulatory regime for ESG ratings providers, along with the draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2024. HM Treasury confirms that it will be proceeding with its proposal to bring the provision of ESG ratings within the scope of the U.K. regulatory perimeter. The government welcomes technical comments on the draft regulation by January 14, 2025. The government plans to finalize the legislation in 2025, at which point the Financial Conduct Authority will consult on the specific requirements. HM Treasury expects the overall process of designing, developing and commencing the ESG ratings regulatory regime to take approximately four years.
As part of the design of the future regulatory framework for ESG ratings provision, the FCA is also considering its approach to overseas ESG ratings providers applying for U.K. authorization. This includes exploring whether, according to size, significance, or market impact in the U.K., an ESG ratings provider would be expected to be incorporated in the U.K. HM Treasury is also exploring creating overseas regimes and other access routes into the U.K. market for overseas providers, including a possible market access or overseas regime for ratings issued in overseas jurisdictions. -
Mansion House: Financial Services Growth and Competitiveness Strategy
November 14, 2024
HM Treasury has launched a call for evidence on a proposed Financial Services Growth & Competitiveness Strategy, a key part of the latest Mansion House reforms. Once developed, the Strategy will serve as the central guiding framework for the next ten years through which the government aims to deliver sustainable, inclusive growth for the financial services sector and secure the U.K.'s competitiveness as an international financial center. To meet its objectives, the proposed strategy sets out five core policy pillars central to sustainable growth: innovation and technology, regulatory environment, regional growth, skills and access to talent, and international partnerships and trade. The proposed strategy also identified five priority growth areas within the financial services sector: fintech, sustainable finance, capital markets (including retail investment), insurance and reinsurance markets, and asset management and wholesale services. Responses to the call for evidence may be submitted is December 12, 2024. HM Treasury intends to publish the strategy in Spring 2025.
Read more. -
UK Transition Plan Taskforce Publishes Final Report on Progress Achieved and the Path Ahead
October 31, 2024The Transition Plan Taskforce has published its final report on the progress achieved and the path ahead. The report marks the end of the TPT's efforts to establish a gold standard for private sector transition plans. The report identifies key opportunities and challenges for the global adoption of transition plans, including building market capabilities, sharing best practices, developing tools for decision-makers, and fostering global consistency in transition planning norms.
The final report reveals that more companies than ever are disclosing their transition plans and aligning their business strategies with net-zero commitments. Financial institutions increasingly leverage these transition plans to direct transition finance, driving investments towards sustainable solutions. Internationally, momentum continues to grow to establish consistent standards and regulations on transition planning. The TPT observes that a growing number of jurisdictions are adopting the International Financial Reporting Standards (IFRS) S1 and S2 Standards. With the IFRS assuming responsibility for the TPT's disclosure materials, these will be utilized worldwide to support the emergence of a global norm on transition planning. The report also highlights four key areas where collective efforts could be focused in the future, to mainstream effective transition plans across the economy: (i) building market capabilities, practice and sharing experiences; (ii) developing enabling tools and driving thought leadership; (iii) ensuring that transition plans are integrated into decision-making; and (iv) increasing global consistency in transition planning norms and expectations. -
European Supervisory Authorities Publish Joint Report on Principal Adverse Impacts Disclosures under the EU Sustainable Finance Disclosure Regulation
October 30, 2024
The European Supervisory Authorities have published their third annual report on disclosures of principal adverse impacts under the EU Sustainable Finance Disclosure Regulation. The report assesses both entity and product-level PAI disclosures under the SFDR. These disclosures aim to show the negative impact of financial institutions' investments on the environment and people and the actions taken by asset managers, insurers, investment firms, banks and pension funds to mitigate them.
Overall, the report shows that financial institutions have improved the accessibility of their PAI disclosures. There has also been positive progress regarding the quality of the information disclosed by financial products, and, in general, in the quality of the PAI statements although the share of products disclosing SFDR PAI information remains quite low. A few national regulators also reported slight improvements in the compliance with the SFDR disclosures in their national markets. The ESAs state that while the level of compliance with the SFDR provisions, both at Level 1 and implementing measures is not yet fully satisfactory, it is important to recognize that both national regulators and financial market participants have made significant improvements, but additional efforts to achieve full compliance are still needed.
The ESAs conclude the report by making a number of recommendations to the European Commission and to national regulators. They also reiterate the need for national regulators to reduce the frequency of their assessment of the PAI disclosures under the SFDR to every two or three years. The ESAs believe these reports are valuable, but a less frequent reporting timeline would allow the ESAs and national regulators to focus more resources on delivering a more meaningful analysis of the PAI disclosures and to draw lessons from previous exercises. -
Glasgow Financial Alliance for Net Zero Consults on Guidance on Nature in Net-Zero Transition Plans and Index Guidance to Support Real-Economy Decarbonization
October 29, 2024
The Glasgow Financial Alliance for Net Zero has published a consultation paper on nature in net-zero transition plans, which supplements the guidance provided in its November 2022 financial institution net-zero transition plans report. The proposed guidance covers opportunities to reduce nature emissions or increase nature sinks (natural climate mitigation), as well as opportunities to support emissions reductions and sequestration through nature-related activities (natural climate enablers). GFANZ explains that collectively, these nature-related levers expand the toolkit for financial institutions to achieve their net-zero commitments and may identify more potential net-zero financing opportunities. GFANZ notes that general impacts on nature from climate change are beyond the scope of the proposed guidance but are discussed in the consultation paper as an area for ongoing consideration, which may lead to integrated transition planning in the future. The deadline for comments is January 27, 2025. GFANZ expects to publish the final supplemental guidance in Q1 2025.
Read more. -
European Securities and Markets Authority Consultation on Technical Advice under the Prospectus Regulation and Call for Evidence
October 28, 2024
The European Securities and Markets Authority has published a consultation paper on draft technical advice under the EU Prospectus Regulation and a call for evidence on prospectus liability. The consultation recommendations aim to facilitate European capital market activity by streamlining and reducing regulatory burden. It also puts forward proposals for non-equity securities that are advertised with ESG features and proposals to update the data reporting requirements to consider the changes introduced by the Listing Act. The Listing Act calls for an analysis of the liability of the information given in a prospectus and an assessment of whether further harmonization is warranted in this regard. It also calls for proposals of amendments to the liability provisions to be presented if relevant. As such the call for evidence on prospectus liability aims to gather input to provide technical advice on whether further harmonization should be considered. The deadline for comments on both publications is December 31, 2024. ESMA aims to publish its final technical advice to the EC in two separate final reports based on feedback received in Q2 2025. -
Taskforce on Nature-Related Financial Disclosures Publishes Draft Guidance on Nature Transition Planning at COP16
October 27, 2024
The Taskforce on Nature-related Financial Disclosures has published a discussion paper setting out draft guidance on nature transition planning for corporates and financial institutions developing and disclosing a transition plan in line with the TNFD recommended disclosures. The TNFD explains that delivering the transition implied by the Kunming-Montreal Global Biodiversity Framework (GBF) requires significant changes to business practices across all sectors. The guidance covers all aspects of nature apart from climate change and greenhouse gas emissions as drivers of nature loss, and natural carbon stocks. The TNFD explains that transition planning for these topics is covered in guidance from organizations such as GFANZ.
Key focus areas of the discussion paper are: (i) a definition of a nature transition plan; (ii) an overview of related initiatives; (iii) guidance on what a nature transition plan should include; (iv) guidance on how a plan should be presented and disclosed; and (v) areas of further work needed to support development and assessment of nature transition plans. TNFD aims for the discussion paper to inform the development of TNFD guidance on the content and disclosure of nature transition plans, stimulate further work and collaboration to support nature transition plans including on transition pathways and transition finance categories and encourage organizations to pilot test the TNFD draft guidance. The deadline for comments is February 1, 2025 and the Taskforce plans to publish final TNFD guidance on nature transition plans in 2025. -
UK Climate Financial Risk Forum Publishes Guides on Climate Risk
October 10, 2024
The U.K. Climate Financial Risk Forum (CFRF) has published three guides to help the financial sector develop its approach to climate-related financial risks and opportunities. The CFRF is a financial services industry forum established jointly by the U.K. Financial Conduct Authority and Prudential Regulation Authority and is comprised of senior representatives from across the financial services industry. The three guides are: (i) Nature-related Risk: Handbook for Financial Institutions - this provides an introduction for financial institutions to help frame nature as a risk, and discusses emerging practices in incorporating nature into financial risk management; (ii) Short-Term Scenarios - this discusses the use cases of short-term scenarios for banks/asset managers/insurers to provide more guidance to firms; and (iii) Mobilising Adaptation Finance to Build Resilience - this provides guidance for the industry to assess the physical risks they face and to facilitate increased levels of investment into climate adaptation to respond to those risks as an opportunity. -
EU Guidelines on Funds' Names Using ESG or Sustainability-Related Terms
August 21, 2024
The European Securities and Markets Authority has published the official translations of its guidelines on funds' names using ESG or sustainability-related terms. The objective of the guidelines is to ensure that investors are protected against unsubstantiated or exaggerated sustainability claims in fund names, and to provide asset managers with clear and measurable criteria to assess their ability to use ESG or sustainability-related terms in fund names.
The guidelines establish that to be able to use these terms, a minimum threshold of 80 percent of investments should be used to meet environmental, social characteristics or sustainable investment objectives. The guidelines will start applying on November 21, 2024. The transitional period for funds existing before the application date is six months after that date, on May 21, 2025. Any new funds created on or after the application date are expected to apply the guidelines immediately. -
European Securities and Markets Authority Opinion on the Functioning of the Sustainable Finance Framework
July 24, 2024
The European Securities and Markets Authority has published an Opinion on the sustainable finance regulatory framework, setting out possible long-term improvements. ESMA acknowledges that while the EU sustainable finance framework is already well developed and includes safeguards against greenwashing, it does believe that, in the longer-term, the framework could further evolve to facilitate investors' access to sustainable investments and support the effective functioning of the sustainable investment value chain. The opinion builds on ESMA's progress report on greenwashing and the joint opinion of the European Supervisory Authorities on the review of the EU Sustainable Finance Disclosure Regulation. The opinion also represents the last component of ESMA's reply to the Commission's request for input related to greenwashing, next to the final report on greenwashing.
Read more. -
Corporate Sustainability Due Diligence Directive Published
July 5, 2024
The Corporate Sustainability Due Diligence Directive (Directive (EU) 2024/1760) has been published in the Official Journal of the European Union. The Directive aims to ensure that companies operating in the EU internal market contribute to sustainable development and the sustainability transition by identifying, preventing and mitigating actual or potential adverse human rights and environmental impacts connected with companies' operations, the operations of their subsidiaries and of their business partners in their chain of activities. CSDDD imposes obligations upon large EU and non-EU companies which meet certain conditions on turnover and employee thresholds.
The CSDDD will enter into force on July 25, 2024, and member states have until July 26, 2026 to transpose it into national law. Application will then be on a staggered basis, starting from July 26, 2027, for the largest companies. -
Second Edition of Network for Greening the Financial System Guide on Climate-Related Disclosure for Central Banks Published
June 19, 2024
The Network for Greening the Financial System has updated its guide on climate-related disclosure for central banks. The guide calls on central banks to disclose their climate-related risks and opportunities. The updated guide is organized around the four thematic areas identified by the Task Force on Climate-Related Financial Disclosures—governance, strategy, risk management, and metrics and targets. It builds on and aims to complement the original TCFD recommendations, providing additional guidance for central banks. The updates include: (i) a new chapter on metrics and targets benefits from the NGFS' work on sustainable and responsible investment; (ii) additional support on the disclosure of internal operations, building on work conducted by the NGFS subgroup on greening central banks' corporate operations; and (iii) new sections on the disclosure on institutional functions, i.e. monetary policy, supervision, financial stability. Looking ahead, the NGFS will build upon the guide to further strengthen its role as a forum for central banks to share their practical experiences and support one another in enhancing their climate-related measures. -
European Supervisory Authorities Publish Joint Opinion on the Assessment of the EU Sustainable Finance Disclosure Regulation
June 18, 2024
The European Supervisory Authorities have published a joint opinion assessing the EU Sustainable Finance Disclosure Regulation. The opinion proposes simplification of product categories under the existing regulation, following confusion among retail investors about SFDR templates and the labelling of products as "Article 8" or "Article 9" as a method of quality assurance, leading to greenwashing risks. It is argued that disclosures should be jargon free, empowering investors to understand the underlying sustainability profile of financial products. The ESAs recommend the introduction of a product classification system based on regulatory categories or sustainability indicators. The ESAs suggest two product categories, "sustainable" and "transition". The need for an unambiguous definition of "sustainability" that differentiates between "environmentally" and "socially" sustainable categories is noted. The ESAs strongly recommend the European Commission ensures that sustainability disclosures cater to different investor needs and that the Commission implement a sustainability indicator that grades financial products, indicating whether it is environmentally sustainable, socially sustainable, or both. -
Delegated Regulation Published on Sustainability Impact Disclosures for Simple, Transparent and Standardized Securitizations under the EU Securitization Regulation
June 18, 2024
Commission Delegated Regulation (EU) 2024/1700 has been published in the Official Journal of the European Union, supplementing the EU Securitization Regulation with regard to RTS specifying, for simple, transparent, and standardized non-asset backed commercial papers traditional securitization, and for STS on-balance-sheet securitization, the content, methodologies, and presentation of information related to the principal adverse impacts of the assets financed by the underlying exposures on sustainability factors, was published in the Official Journal of the European Union. The Capital Markets Recovery Package amended the Securitization Regulation to provide originators of STS securitizations with the option to disclose available information related to the principal adverse impacts on sustainability factors of the assets financed by residential loans, auto loans, or leases. The Delegated Regulation aims to standardize the type and presentation of information an originator may opt to disclose about the adverse impacts of assets financed by underlying exposures, on the environment, and other sustainability factors. The Delegated Regulation also seeks to ensure as much consistency as possible with the European Supervisory Authorities' work in respect of sustainability-related disclosures in financial services under the EU Sustainable Finance Disclosure Regulation. The Delegated Regulation will enter into force on July 9, 2024, 20 days following its publication in the Official Journal of the European Union. -
UK Financial Conduct Authority Consults on Extending Sustainability Disclosure Requirements Regime to Portfolio Management
04/23/2024
The U.K. Financial Conduct Authority published a consultation paper on April 23, 2024 on the possibility of extending the Sustainability Disclosure Requirements and labeling regime to portfolio management firms. Responses to the consultation should be submitted by June 14, 2024.
The SDR regime was introduced in November 2023, applying a new anti-greenwashing rule to all FCA-authorized firms and a range of disclosure, labeling and naming/marketing requirements to U.K. asset managers.
Read more. -
UK Financial Conduct Authority Publishes Guidance on Anti-Greenwashing Rule
04/23/2024
On April 23, 2024, the U.K. Financial Conduct Authority published guidance on its anti-greenwashing rule, which was introduced into the FCA Handbook's Environmental, Social and Governance Sourcebook as part of the FCA's sustainability disclosure and labeling regime in November 2023. The rule requires authorized firms to ensure that references to the sustainability characteristics of products or services which they market to those in the U.K. are fair, clear and not misleading and are consistent with the sustainability characteristics of the product or service in question. The rule is intended to complement and be consistent with existing fair, clear and not misleading requirements found elsewhere in the FCA's rules (e.g., the Principles for Business and Conduct of Business Sourcebook).
The FCA's guidance sets out the regulator's expectations of firms subject to the rule. It provides that sustainability references should: (i) be correct and capable of being substantiated; (ii) be clear and presented in a way that can be understood; (iii) be complete (with no omission of important information); and (iv) make fair and meaningful comparisons with other products and services. Firms subject to the Consumer Duty should test whether their communications are likely to be understood by customers and should ensure they can understand and monitor customer outcomes and take proactive steps to investigate and correct any problems they identify. The completeness requirement means firms must make clear where aspects of a product or service could have a negative impact on sustainability. A firm issuing green bonds, for example, should be transparent about all eligible activities, including any related to optimizing the efficiency of fossil fuel production.
Read more. -
UK Financial Conduct Authority Publishes Policy Statement on Sustainability Disclosure and Labeling Regime
11/28/2023
The U.K. Financial Conduct Authority published on November 28, 2023 its final policy statement on its new sustainability disclosure requirements and investment labels. The regime is intended to improve the integrity of the market and enhance consumer protection. It forms part of the U.K.'s broader strategy for enhancing protections around sustainability-related products and services, which includes guiding principles for sustainable investment funds, a Roadmap to Sustainable Investing and the 2023 Green Finance Strategy. The new rules enter into force on a staggered basis, as described below.
Read more. -
EU Publishes New Sustainable Finance Package
07/11/2023
The EU published a new Sustainable finance package 2023 on June 13, 2023. The package includes:- A Proposed Regulation on the transparency and integrity of ESG rating activities, which aims to enhance the quality of ESG ratings. The Regulation will introduce an authorization and ongoing supervision regime for ESG rating providers along with certain obligations, e.g., disclosures on ratings methodologies. The proposal does not intend to harmonize the methodologies for the calculation of ESG ratings, but to increase their transparency. Third-country ESG rating providers may be able to offer their services in the EU under either equivalence, endorsement or recognition. The U.K. is currently consulting on making the provision of ESG ratings a regulated activity.
Read more. -
UK Government Publishes 2023 Green Finance Strategy
03/30/2023
The U.K. Government has published the 2023 Green Finance Strategy, its latest plan for mobilizing finance to support the shift to a greener financial system. The U.K. has committed to becoming a net zero economy by 2050.
The action points in the Strategy are based on two pillars: ‘Align’, which focuses on aligning financial markets with U.K. and global climate targets; and ‘Invest’, which encourages green investment. The proposals will have significant implications for corporates, financial institutions and investment firms, asset managers and financial market infrastructure providers.
Read more. -
UK Government Consults on Regulation of ESG Ratings Providers
03/30/2023
As part of its new Green Finance Strategy, HM Treasury has published a consultation paper on proposals to regulate providers of environmental, social and governance ratings. Such ratings providers offer assessments on a firm’s exposure to ESG risks or a firm’s impact on ESG matters. HM Treasury has found that these assessments increasingly trigger responses in financial markets and should therefore be subject to regulation. Responses to the consultation should be submitted by June 30, 2023.
Read more. -
International Organization of Securities Commissions Publishes Consultation and Discussion Paper on Carbon Markets
11/09/2022
The International Organization of Securities Commissions has published a consultation on Compliance Carbon Markets and a separate discussion paper on voluntary carbon markets. Compliance Carbon Markets involve the issuance of carbon allowances by regional, national or state bodies. Companies are obligated to participate in the schemes to "pay" for their emissions. These markets are governed by regulations set at regional, state and international levels. The U.K., EU, Switzerland and California, for example, each have national Emissions Trading Schemes (as do some other countries or states). VCMs, on the other hand, involve participants who wish to offset their carbon emissions by buying carbon credits issued in relation to climate change mitigation or greenhouse gas reduction projects. VCMs are largely unregulated and, unlike Compliance Carbon Markets, are not mandatory. Instead, independent certification bodies usually check projects underlying credits for carbon reduction projects. Those credits can then be traded, either over-the-counter (which accounts for the majority of trades) or on exchanges.
Read more. -
FCA Publishes Consultation Paper on Sustainability Disclosure Requirements
10/25/2022
Following its 2021 Discussion Paper, the FCA has published a consultation paper setting out proposals to enhance sustainability disclosure and labeling requirements for sustainability-linked investment products. The majority of the rules will apply only to fund and asset managers, although the FCA is considering expanding this to FCA-regulated asset owners in relation to their investment products and for certain rules to apply to distributors of investment products to U.K. retail investors. The proposals are directed at fund and asset managers and portfolio managers based in the U.K. The FCA will consult separately on how these proposals apply to overseas fund and asset managers. The FCA already has climate-related disclosure rules for premium listed issuers, as well as rules for standard listed issuers and certain FCA-regulated firms (asset managers, life insurers, pure reinsurers and FCA-regulated pension providers).
Read more. -
European Commission Call for Advice on Greenwashing Monitoring and Supervision
08/15/2022
The European Commission has published a call for advice addressed to the European Supervisory Authorities on the monitoring and supervision of "greenwashing" across the EU. Greenwashing can broadly be understood as the misleading marketing of a company or product as being environmentally friendly or sustainable, when that is not (or not substantially) the case. The EU has introduced legislation to preserve the reliability and transparency of ESG disclosures, including the Taxonomy Regulation and Sustainable Finance Disclosure Regulation. However, the Commission considers it important to continue monitoring greenwashing risks and assess the effectiveness of supervisory activities.
Read more. -
UK Government Publishes UK Infrastructure Bill
05/12/2022
The U.K. Government has published the U.K. Infrastructure Bill, a piece of legislation designed to put the U.K. Infrastructure Bank on a statutory footing. The Bank was launched in interim form in June 2021 as part of the Chancellor of the Exchequer's plan to "level up" the U.K. and help achieve the U.K.'s target of net zero emissions by 2050. It will operate in partnership with private and public sector institutions to invest in projects which promote regional growth across the U.K. and support efforts to tackle climate change. The bank will have £22bn of financial capacity (via a mixture of equity and debt capital and the ability to issue guarantees) and it is hoped that its investments will help to generate over £40bn of overall investment for its projects.
Read more. -
European Supervisory Authorities Publish Consultation Paper on Sustainability Disclosures for Simple, Transparent and Standardized Securitizations
05/02/2022
The European Banking Authority, European Insurance and Occupational Pensions Authority and European Securities and Markets Authority have published a consultation on draft Regulatory Technical Standards for disclosures on sustainability indicators in simple, transparent and standardized securitizations. Responses to the consultation should be submitted by July 2, 2022.
Read more. -
European Banking Authority Publishes Discussion Paper on Role of Environmental Risks in the Prudential Framework
05/02/2022
The European Banking Authority has published a discussion paper on whether, and how, environmental risks should be incorporated into the EU prudential frameworks for EU credit institutions and investment firms. The feedback received will help the EBA to determine (in accordance with its mandates under the EU Capital Requirements Regulation and EU Investment Firm Regulation) whether the EU should introduce specific prudential treatment for certain exposures and assets that are substantially linked to environmental and/or social objectives and impacts. Responses should be submitted by August 2, 2022.
Read more. -
European Commission Publishes Proposed Directive on Corporate Sustainability Due Diligence
02/23/2022
The European Commission has published a proposed Directive on Corporate Sustainability Due Diligence. The proposed Directive is designed to encourage the conduct of due diligence by major companies (including regulated financial institutions) on their value chains to identify risks linked to human rights or environmental impacts. This in turn is intended to support the objectives of the European Green Deal and assist in the transition to a climate-neutral and green economy.
Read more. -
European Securities and Markets Authority Publishes Call for Evidence on Climate Risk Stress Testing for Central Counterparties
02/23/2022
The European Securities and Markets Authority has published a Call for Evidence on climate risk stress testing for EU central counterparties. Responses should be submitted by April 21, 2022.
Read more. -
Financial Stability Board Publishes 2022 Work Priorities
02/17/2022
The Financial Stability Board has published a letter to G20 Finance Ministers and Central Bank Governors outlining its work priorities for 2022, which are:
- Supporting financial market adjustment to a post-COVID-19 world: the FSB observes vulnerabilities in the financial system, such as embedded leverage in some parts of the system and rising real estate and other asset valuations, which could pose risks to stability in the event of tightening financial conditions. Uneven unwinding of pandemic support measures is also a risk and the FSB will prepare an interim report in July and final report in October on policy considerations to support a more even global pandemic recovery.
Read more. -
European Securities and Markets Authority Publishes Sustainable Finance Roadmap for 2022-2024
02/10/2022
The European Securities and Markets Authority has published its Sustainable Finance Roadmap for 2022-2024. The Roadmap sets out ESMA's priorities for sustainable finance over the next two years, which include: (i) tackling greenwashing and promoting transparency; (ii) building the capacity of national regulators and ESMA to understand and address the supervisory implications of new legislation and market practices; and (iii) monitoring emerging trends in environmental, social and governance markets and related risks and vulnerabilities.
Read more. -
European Banking Authority Publishes Final Draft Implementing Technical Standards on Prudential Disclosures of ESG Risks
01/24/2022
The European Banking Authority has published final draft Implementing Technical Standards on Pillar 3 prudential disclosures of environmental, social and governance risks under the EU Capital Requirements Regulation. The ITS specify the type and format of information to be published in accordance with the new CRR requirements on disclosure of prudential information on ESG risks.
Read more. -
FCA Publishes Policy Statements on Climate-Related Disclosures for Standard Listed Companies and FCA-Regulated Firms
12/17/2021
The FCA has published two policy statements introducing new rules and guidance on climate-related disclosures for standard listed issuers and certain other FCA-regulated firms. The Policy Statements mirror the rule imposed under the FCA's Policy Statement on climate-related disclosures for premium listed issuers.
Read more. -
European Supervisory Authorities Publish Final Report on Expanded Disclosures under the EU Sustainable Finance Disclosure Regulation
10/22/2021
The European Supervisory Authorities (the European Securities and Markets Authority, the European Banking Authority and the European Insurance and Occupational Pensions Authority) have published a new final report and draft Regulatory Technical Standards on disclosures to be made under the EU Sustainable Finance Disclosure Regulation. The EU SFDR was published in December 2019 and the majority of its provisions have applied since March 10, 2021.
Read more. -
European Commission Publishes Study on Banks’ and Prudential Supervisors’ Integration of ESG Factors
09/27/2021
The European Commission has published a study on EU banks’ integration of environmental, social and governance factors into their risk management processes, business strategies and investment policies. The study finds that, although banks have made efforts to pursue ESG agendas, the speed and degree of integration of ESG considerations must accelerate. In addition, it finds that prudential supervisors could take more action to integrate ESG factors into their supervision of banks. Further details of the challenges facing banks and supervisors in ESG integration are set out in the study.
Read more. -
UK Listings Regulator Consults on Tightening Diversity Requirements for Listed Companies
07/28/2021
The U.K. Financial Conduct Authority has opened a consultation on proposals to amend the requirements on diversity and inclusion on listed company boards and executive committees. The proposals include changes to the Listing Rules and the Disclosure and Transparency Rules, including guidance. The consultation closes on October 20, 2021. The FCA intends to publish final rules before the end of 2021 and for the new requirements to apply to accounting periods starting on or after January 1, 2022. This means that annual financial reports published for 2022 in spring 2023 would include the reporting changes.
Read more. -
UK has established a new Green Technical Advisory Group
07/09/2021
HM Treasury has announced a new independent group, called the Green Technical Advisory Group, to help tackle “greenwashing” and create a U.K. green taxonomy. “Greenwashing” refers to unsubstantiated or exaggerated claims that an investment is environmentally friendly. GTAG’s main remit is to advise HM Treasury on developing and implementing a U.K. green taxonomy, comprising technical screening criteria. GTAG consists of financial services industry representatives, non-financial services representatives, taxonomy and climate experts. HM Treasury, the U.K. Financial Conduct Authority and the Bank of England will be observers. GTAG is expected to provide initial recommendations to HM Treasury as early as September of this year.
View the GTAG Terms of Reference. -
UK Regulators Open Discussion on Accelerating Diversity and Inclusion in the Financial Services Sector
07/07/2021
The U.K. Financial Conduct Authority, Prudential Regulation Authority and the Bank of England (as regulator for financial market infrastructure) have published a discussion paper on diversity and inclusion in the financial sector. Feedback to the discussion paper may be submitted until September 30, 2021. It is expected that the FCA and PRA will consult on detailed proposals in Q1 2022 and aim to issue final Policy Statements in Q3 2022. The regulators aim to develop policy, rules and guidance that set clear minimum expectations and note that they will be prepared to use their regulatory powers where a firm fails to meet those expectations. The regulators intend to introduce any new requirements proportionately.
Read more. -
Financial Stability Board Publishes Roadmap on Climate-Related Financial Risks
07/07/2021The Financial Stability Board has published a series of three climate-related reports as part of its roadmap for addressing climate-related financial risks. The global risks to financial stability posed by climate change are being addressed by a number of international initiatives and the FSB hopes to utilize its diverse membership to coordinate efforts internationally. The FSB's reports are:
- a Roadmap for Addressing Climate-Related Financial Risks, which sets out a plan to address climate-related financial risks;
- a report on The Availability of Data with Which to Monitor and Assess Climate-Related Risks to Financial Stability, which reviews the availability of data to monitor and assess climate-related risks to financial stability and outlines priorities to address gaps in data; and
- a report on Promoting Climate-related Disclosures, which provides recommendations to financial regulators in developing frameworks for climate-related disclosures.
-
UK Conduct Regulator Consults on Enhancing Climate-Related Disclosures for Listed Companies and Certain Regulated Firms
06/22/2021
The U.K. Financial Conduct Authority has published two consultation papers that set out new proposals on climate-related disclosure rules for listed companies and certain regulated firms. The proposals follow the introduction of climate-related disclosure rules for the most prominent listed commercial companies in December 2020 that are aligned with the recommendations of the global Taskforce on Climate-related Financial Disclosures. Responses to the consultations may be submitted until September 10, 2021. The FCA is aiming to publish its final rules and policy statements for these proposals by the end of the year.
Read more. -
European Banking Authority Publishes Opinion on Disclosure Indicators and Methodology Under Taxonomy Regulation
03/01/2021
The European Banking Authority has published an opinion and a report on the key performance indicators and methodology that firms subject to the EU Taxonomy Regulation should adopt when disclosing information on the extent of their environmentally sustainable activities. The EU Taxonomy Regulation was published in June 2020 and establishes a classification system for sustainable activities to provide a consistent, EU-wide understanding of the environmental sustainability of activities and investments. The Regulation imposes an obligation upon EU firms that report under the Non-Financial Reporting Directive to disclose information on how, and the extent to which, their activities constitute economic activities that are "environmentally sustainable" for the purposes of the Taxonomy Regulation. Corporates will have to begin disclosing information on certain environmental objectives from January 2022, with disclosures on other objectives disclosed from January 2023. Most provisions of the Taxonomy Regulation have applied directly across the EU since July 12, 2020.
Read more. -
European Securities and Markets Authority Publishes Final Report and Advice on KPIs and Disclosure Methodology Under Taxonomy Regulation
03/01/2021
The European Securities and Markets Authority has published a final report and advice addressed to the European Commission on the key performance indicators and methodology that firms subject to the EU Taxonomy Regulation should adopt when disclosing information on the extent of their environmentally sustainable activities. The EU Taxonomy Regulation was published in June 2020 and establishes a classification system for sustainable activities to provide a consistent, EU-wide understanding of the environmental sustainability of activities and investments. The Regulation imposes an obligation upon EU firms that report under the Non-Financial Reporting Directive to disclose information on how, and the extent to which, their activities constitute economic activities that are "environmentally sustainable" for the purposes of the Taxonomy Regulation. Corporates will have to begin disclosing information on certain environmental objectives from January 2022, with disclosures on other objectives disclosed from January 2023. Most provisions of the Taxonomy Regulation have applied directly across the EU since July 12, 2020.
Read more. -
European Supervisory Authorities Publish Final Report on Disclosures Under the EU Regulation Sustainable Finance Disclosure Regulation
02/04/2021
The European Supervisory Authorities (the European Securities and Markets Authority, the European Banking Authority and the European Insurance and Occupational Pensions Authority) have published a final report and draft Regulatory Technical Standards on the content, methodologies and presentation of disclosures under the EU Regulation on sustainability-related disclosures in the financial services sector. The EU SFDR was published in December 2019 and the majority of its provisions will apply from March 10, 2021. It is designed to encourage the financial services sector to disclose information about their approaches to sustainability risk and consideration of adverse sustainability impacts in the course of their businesses. The ESAs consulted on the draft RTS in April 2020. The ESAs propose that the draft RTS should apply from January 1, 2022.
Read more. -
Financial Stability Board Report on Impact of Climate Change on Financial Stability
11/23/2020
The Financial Stability Board has published a report on the Implications of Climate Change for Financial Stability. The report breaks climate-related financial stability risks down into three key categories: (i) physical risks (i.e., risks of economic losses caused by natural catastrophes); (ii) transition risks (i.e., risks arising from the process of adjusting to a low carbon economy); and (iii) liability risks (i.e., risks arising from parties being held liable for losses caused by environmental damage).
Read more. -
Task Force on Climate-Related Financial Disclosures Publishes 2020 Status Report and Guidance
10/29/2020
The Financial Stability Board's Task Force on Climate-Related Financial Disclosures has published its 2020 Status Report, describing progress in the global adoption of the TCFD's recommendations.
Read more. -
European Banking Authority Publishes Survey on Banks' Environmental, Social and Governance Risk Disclosure Frameworks
09/17/2020
The European Banking Authority has published a survey designed to collect information on large banks' disclosure practices on environmental, social and governance risks. The EU Capital Requirements Regulation implements the Basel Committee on Banking Supervision's Pillar 3 disclosure requirements, which require banks to disclose information about their risks and risk management procedures and policies. In 2018, the Basel Committee published updated Pillar 3 requirements. The revised CRR, published in June 2019, incorporates the revised Basel Committee disclosure standards and mandates the EBA to produce draft Implementing Technical Standards to ensure comparability of the disclosures made with international non-EU active banks.
Read more. -
UK Climate Financial Risk Forum Publishes 2020 Guide
07/29/2020
The U.K. Climate Financial Risk Forum has published its first guide providing practical recommendations for the financial services sector on how to respond to climate-related financial risks. The CFRF was established by the U.K. Prudential Regulation Authority and Financial Conduct Authority and is made up of industry representatives from the banking, insurance and asset management sectors, as well as others such as the London Stock Exchange Group and the Green Finance Institute. The CFRF aims to build capacity and share best practice across the finance industry in order to improve the financial services sector's response to the financial risks arising from climate change.
Read more. -
EU Sustainable Finance Group Publishes Principles for Recovery and Resilience
07/15/2020
The EU Technical Expert Group on Sustainable Finance has published a statement on five high-level principles for recovery and resilience. The statement is made in the context of the EU’s current discussions about recovery and resilience in response to the coronavirus pandemic. The TEG is proposing the five principles supported by recommendations for applying the EU’s Taxonomy to the EU’s recovery plan. The Taxonomy is set out in a recently adopted EU Regulation on the establishment of a framework to facilitate sustainable investment. The Taxonomy is a classification system for sustainable activities that is designed to provide a shared understanding of the environmental sustainability of activities and investments.
Read more. -
EU Sustainable Finance Taxonomy Regulation Published
06/22/2020
A new EU Regulation on the establishment of a framework to facilitate sustainable investment (commonly referred to as the Taxonomy Regulation) has been published in the Official Journal of the European Union. The Taxonomy is a classification system for sustainable activities that is designed to provide a shared understanding of the environmental sustainability of activities and investments. The Regulation sets out the environment objectives for the Taxonomy and the criteria for determining whether an economic activity qualifies as environmentally sustainable. It also makes various amendments to the Sustainable Finance Disclosure Regulation, including requiring the European Supervisory Authorities to develop regulatory technical standards specifying the content and presentation of information demonstrating that a given investment does not significantly harm relevant environmental objectives.
Read more. -
European Securities and Markets Regulator Publishes 2019 Annual Report and Updated 2020 Work Program
06/15/2020
The European Securities and Markets Authority has published its 2019 Annual Report together with an updated version of its 2020 Work Program, incorporating changes in response to the COVID-19 pandemic.
ESMA’s 2019 Annual Report discusses ESMA’s work in 2019, which included: (a) the entry into force of EMIR 2.2, including significant new responsibilities for ESMA in the authorization and supervision of CCPs; (b) ESMA’s common supervisory action on the application of the revised Markets in Financial Instrument Directive’s requirements on the assessment of appropriateness, for which ESMA will consider whether any follow-up work is needed in 2020; (c) reviews of MiFID II and the Markets in Financial Instruments Regulation, including on fair access to, and lowering the cost of, market data and the consolidated tape; and (d) sustainable finance, including technical advice delivered to the European Commission on the integration of sustainability risks for investment firms and investment funds into relevant EU legislation, a report on undue short-termism in securities markets and contributions to the technical expert group on sustainable finance which is due to deliver technical advice on delegated legislation relating to the EU Benchmarks Regulation.
Read more.