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.
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ESMA consultation on transparency and integrity of ESG rating activities
2 May 2025
The European Securities and Markets Authority (ESMA) has published a consultation paper on draft regulatory technical standards (RTS) on the transparency and integrity of environmental, social and governance (ESG) rating activities under Regulation (EU) 2024/3005. This was published together with a press release. The Regulation introduces a common regulatory approach to enhance the integrity, transparency, comparability where possible, responsibility, reliability, good governance and independence of ESG rating activities, and seeks to contribute to the transparency and quality of ESG ratings and to the sustainable finance agenda of the EU. ESMA is mandated to deliver draft RTS in relation to authorisation, recognition, separation of activities and disclosures. The draft RTS sets out the aspects that apply to ESG rating providers, including:- The information that should be provided in the applications for authorisation and recognition.
- The measures and safeguards that should be put in place to mitigate risks of conflicts of interest within ESG rating providers who carry out activities other than the provision of ESG ratings.
- The information that they should disclose to the public, rated items and issuers of rated items, as well as users of ESG ratings.
Topic : Sustainable Finance -
EC call for evidence for the revision of SFDR
2 May 2025
The European Commission (EC) has published a call for evidence to inform the revision of the Sustainable Finance Disclosure Regulation (SFDR), which is planned for Q4 2025. The focus of the review will be to address burdens (including regulatory reporting burdens) and simplify and streamline requirements. This call for evidence follows a previous assessment of the SFDR, which included both a targeted and a public consultation, and will inform an impact assessment to support the review of the regulation. To date, feedback on the SFDR has identified areas for improvement, including: (i) legal certainty on key concepts; (ii) relevance of certain disclosure requirements; (iii) overlaps and inconsistencies with other sustainable finance requirements; and (iv) issues in relation to data availability. In addition, there is broad support for a revised SFDR that would (i) cater for different types of investors and financial product; (ii) facilitate retail investor understanding; (iii) consider international reach and exposure; and (iv) direct investment towards diverse sustainability-oriented aims while avoiding greenwashing. In terms of broader impact, by improving clarity and consistency and addressing data-availability issues, the review should reduce operational and compliance costs, to achieve the objectives of the legislation, and facilitate sustainable investing. The deadline for comments is 30 May.Topic : Sustainable Finance -
FMSB Statement of good practice on the governance of sustainability-linked products
30 April 2025
The Financial Markets Standards Board (FMSB) has issued a Statement of Good Practice (SoGP) on the governance of sustainability-linked products (SLPs), along with a press release. SLPs are products where the financial and/or structural characteristics can vary depending on whether the user (i.e., borrower or issuer of, or counterparty to, SLPs) achieves specific sustainability or ESG objectives. They can be used for general corporate purposes, which allows many users (e.g., borrowers, issuers or counterparties to SLPs) to access the sustainable finance market in a more flexible way. With the growth of SLP issuances and accompanying concerns around the credibility of such instruments, the SoGP is intended to: (i) codify good practices for the governance of SLPs and (ii) support the adoption of consistent governance approaches across asset classes and jurisdictions. This is aimed to enhance the quality and integrity of SLPs; boost market confidence; help mitigate greenwashing risk; and support the development of a deeper, more robust sustainability-linked product market. The SoGP will apply to service providers (e.g., firms acting as sustainability-linked loan lenders, bookrunners or lead arrangers on a sustainability-linked bond issuance or counterparties to a sustainability-linked derivative) or users of SLPs in wholesale financial markets and to support, and be read in conjunction with, existing asset-class specific guidance (notably ICMA, LMA and ISDA principles). -
ESMA issues guidelines on the enforcement of sustainability information
29 April 2025
The European Securities and Markets Authority (ESMA) has published official translations of the guidelines, on the enforcement of sustainability information under the Transparency Directive (for background, please see our update). The guidelines are based on Article 28d of the Transparency Directive and aim to establish consistent and effective supervisory practices for all competent authorities to ensure that sustainability information provided by issuers, who have securities admitted to trading on a regulated market and who are required to publish sustainability information under the Accounting Directive, comply with the requirements of Article 24(4) of the Transparency Directive. The guidelines cover, among other things: (i) the objective of enforcement, (ii) ensuring an effective enforcement process, (iii) sustainability information prepared under equivalent third country sustainability reporting requirements, (iv) enforcers maintaining adequate independence from all stakeholders, and (v) the choice of enforcement actions. The guidelines shall apply to the enforcement of sustainability information published from 1 January. Competent authorities must notify ESMA within two months whether they (i) comply; (ii) do not comply, but intend to comply, or (iii) do not comply and do not intend to comply with the guidelines, along with their reasons for not complying.Topic : Sustainable Finance -
FCA update on extending SDR regime to portfolio managers
29 April 2025
The UK Financial Conduct Authority (FCA) has updated its webpage summarising feedback to its consultation paper, CP24/8, on extending the sustainability disclosure requirements (SDR) and labelling regime to portfolio managers. This follows a previous update from the FCA, which announced it would no longer publish a policy statement this year. Key feedback to the consultation paper covers proposals on scope, implementation deadlines, labelling portfolios, naming and marketing and disclosures. While there is broad support for the proposals, the feedback highlights the need for more time to address practical challenges and ensure effective implementation of the regime before introducing requirements. As such, the FCA has decided it is not the appropriate time to finalise the rules on extending SDR to portfolio management. The FCA will instead prioritise the multi-firm review into model portfolio services to ensure compliance with the consumer duty and improve good outcomes from model portfolio services. Firms are also reminded to adhere to the anti-greenwashing rule, effective from 31 May 2024.Topic : Sustainable Finance -
Omnibus I 'stop-the-clock' directive published in Official Journal of the EU
16 April 2025
The Directive (EU) 2025/794, amending the EU Corporate Sustainability Reporting Directive (CSRD) and EU Corporate Sustainability Due Diligence Directive (CSDDD), was published in the Official Journal of the EU (OJ), implementing the "stop-the-clock" proposal discussed under the EU Omnibus I package. The Directive entered into force on 17 April. Member states must transpose the Directive by 31 December.
The Directive postpones:- by two years, the application of CSRD reporting requirements to large companies that have not yet started reporting and SMEs. These entities will now have to report in 2028 and 2029, respectively, for financial years starting on or after 1 January 2027 and 1 January 2028 (as applicable); and
- by one year, the transposition deadline and first phase of application of certain due diligence provisions under CSDDD. EU Member States will now have until 26 July 2027 to transpose CSDDD, and the first companies will not have to apply the first phase of measures until 26 July 2028.
Topic : Sustainable Finance -
ESMA TRV report on fund names: ESG-related changes and their impact on investment flows
10 April 2025
The European Securities and Markets Authority (ESMA) has published a trends, risks and vulnerabilities (TRV) risk analysis report on ESG-related changes to fund names and their impact on investment flows. The report examines whether the fund managers decision to incorporate environmental, social, governance or sustainability-related (ESG) terms into their funds' names leads to more investor interest. If so, this has the potential to incentivise greenwashing behaviour, undermine investor trust and hinder efforts to promote sustainability within EU financial markets.
Read more.Topic : Sustainable Finance -
EU recommendations on ESG disclosures under the Benchmarks Regulation
9 April 2025
The European Securities and Markets Authority (ESMA) has published a final report on the outcome of the 2024 Common Supervisory Action (CSA) on ESG disclosures under the Benchmarks Regulation (BMR). The CSA was conducted by ESMA with national competent authorities and assessed how benchmark administrators supervised in the EU comply with the BMR's ESG disclosure requirements. The report presents the findings of the CSA, including that: (i) the lack of specific guidance on the definition and calculation of ESG factors has led to divergent and inconsistent calculation and disclosure practices across benchmarks and administrators; and (ii) there are inconsistent approaches to the underlying assumptions used by administrators for determining the factors. The CSA report recommends that the European Commission considers amendments such as rationalising ESG disclosure requirements, for which ESMA would be able to assist with technical advice. The report also provides clarifications for administrators on transparency expectations and guidance on definitions and methodology used for calculating ESG factors.Topic : Sustainable Finance -
European Parliament votes to delay sustainability and due diligence requirements
3 April 2025
The European Parliament has voted in favour of its 'stop the clock proposal' to delay the application of new sustainability reporting and due diligence under the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). The delay was proposed as part of the European Commission's (EC) "Omnibus I" simplification package, designed to address overlapping or disproportionate rules that are creating unnecessary burdens for EU businesses. The proposal postpones the application of CSRD reporting requirements for companies due to report in 2026 and 2027 (referred to as second and third wave companies), and postpones the transposition deadline and first wave application of the CSDDD by one year (to 2028). The EC had invited the co-legislators to prioritise this proposal in particular, and the Council of the EU endorsed the proposal on 26 March. The draft rules will need to be formally approved by the Council, and then can enter into force.Topic : Sustainable Finance -
UK FCA feedback on responses to discussion paper on finance for positive sustainable change
2 April 2025
The UK Financial Conduct Authority (FCA) has published feedback on the views it received in response to its discussion paper DP 23/1 on finance for positive sustainable change. The discussion paper included sections on a number of areas including business strategy, senior management, accountability, incentives, remuneration and training. The feedback notes that a common theme across responses was the need to wait for new regulation in this area, for example the consumer duty and sustainability disclosure requirements (SDR), to become embedded and a number of responses considered that the existing rules were sufficient. The FCA confirms that it is not currently considering introducing new rules on the discussion paper topics (although notes that since DP 23/1 was published, certain new rules have been introduced including the SDR and labelling rules, and the anti-greenwashing rule). The FCA does, however, confirm that it will continue to monitor developments and promote the themes covered by the discussion paper to help the sustainable finance market grow and promote the UK as a leading financial centre.Topic : Sustainable Finance -
EU platform on sustainable finance reports on technical criteria for new activities and review of the Climate Delegated Act
1 April 2025
Following its call for feedback on a draft report, The Platform on Sustainable Finance, an advisory body to the European Commission (EC) has published a final report on technical criterial for new activities and first review of the Climate Delegated Act. The report covers the activities and technical screening criteria to be updated or included in the EU taxonomy. The report sets out recommendations relating to: (i) the review of the criteria and analysis for the EU Taxonomy Climate Delegated Act; (ii) new activities mandated by the European Commission; (iii) new activities mandated by the European Commission but not completed; and (iv) further recommendations for climate change adaptation.Topic : Sustainable Finance -
EU Platform on Sustainable Finance publishes updated handbook on climate transition and Paris-aligned benchmarks
28 March 2025
The Platform on Sustainable Finance, an advisory body to the European Commission (EC) has published an updated version of its handbook on Climate Transition Benchmarks and Paris-Aligned Benchmarks (version 2), and has also updated its webpage. The first version of the Handbook was published in December 2019, and was in response to frequently asked questions (FAQs) faced by the TEG benchmarks subgroup members when presenting the EU Climate Transition Benchmark (EU CTB), the EU Paris Aligned Benchmark (EU PAB) , and the benchmarks' disclosure guidance on environmental, social or governance (ESG) issues. The updated version covers clarifying (i) the 7% Reduction Trajectory, (ii) matters of terminology, explaining (iii) the anti-greenwashing measures, (iv) data sources and estimation techniques (v) related classification, and (vi) ESG disclosure matters. Each response to a FAQ in the updated version will also now indicate whether it is from 2019 or 2025, as well as referring to which publications of the TEG, may be relevant.Topic : Sustainable Finance -
EU Platform on Sustainable Finance response to Taxonomy Delegated Act consultation
26 March 2025
The Platform on Sustainable Finance, an advisory body to the European Commission (EC) established under Article 20 of the Taxonomy Regulation, has published its response to the EC's Taxonomy Delegated Act consultation.
The Platform is broadly supportive of the simplification proposal but makes a number of recommendations, including: (i) introducing a mechanism for all companies to report partial alignment; (ii) clarifying the materiality threshold; (iii) gradually integrating exposures into the Green Asset Ratio; (iv) postponement of KPIs for Banks; and (v) pausing, rather than excluding, reasonable assurance for Corporate Sustainability Reporting Directive (CSRD) reporting, including the EU Taxonomy entity-level reporting. The Platform raises concerns regarding the reduction of the Taxonomy's scope suggested in the Omnibus proposals, as regards certain corporate sustainability reporting and due diligence requirements. The Platform recommends aligning the scope of Taxonomy reporting with the scope of the CSRD, while preserving the CSRD's original scope. For non-SME companies below the 1,000-employee threshold, the Platform suggests that reporting should be focused on the most essential standards, including Taxonomy alignment.Topic : Sustainable Finance -
Omnibus proposals: Council of the EU agrees position on 'stop-the-clock' mechanism
26 March 2025
The Council of the EU has announced that it has agreed its position on the "stop-the-clock" mechanism to postpone the dates of application of certain corporate sustainability reporting and due diligence requirements, as well as the transposition deadline of the due diligence provisions. In particular, to postpone:- by two years the entry into application of the Corporate Sustainability Reporting Directive (CSRD) requirements for large companies that have not yet started reporting, as well as listed SMEs; and
- by one year the transposition deadline and the first phase of the application (covering the largest companies) of the Corporate Sustainability Due Diligence Directive (CSDDD).
Topic : Sustainable Finance -
Council of the EU adopts financial benchmarks regulation
24 March 2025
The Council of the EU has announced that it has adopted at first reading the financial benchmarks regulation with the aim of reducing red tape for EU companies, particularly SMEs. The regulation amends the Benchmark Regulation (Regulation 2016/1011) (BMR) to reduce the regulatory burden on administrators of benchmarks defined as non-significant by removing them from the scope of the legislation. Critical or significant benchmarks will remain within the scope of the revised BMR. EU administrators that are out of scope will be able to opt-in, under certain conditions.
Additionally, the regulation will establish a revised framework for non-EU benchmark administrators to access the EU markets by, among other things, allowing for recognition without requiring equivalence. The European Securities and Markets Authority (ESMA) is granted supervisory powers over non-EU benchmark administrators, aligning ESMA's oversight across both the recognition and endorsement regimes.
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UK FCA voluntary survey of ESG ratings providers
24 March 2025
The Financial Conduct Authority (FCA) has published a new webpage on a voluntary survey it issued to environmental, social and governance (ESG) ratings providers on 21 March, to help inform the future regulation of ESG ratings and broader sustainability disclosures. This follows a survey in November 2024 open to all who may be users of ESG ratings and sustainability disclosures. The FCA explains that the input from this survey will inform its cost benefit analysis, policy development and help ensure that the future regulation is both proportionate and tailored to the needs of the market. The information requested to help the FCA better understand the ESG ratings market, includes: (i) the business models and group structures used to provide ESG ratings; (ii) how ESG ratings are constructed and distributed: (iii) what policies and processes firms have in place; and (iv) how firms interact with the broader sustainability disclosures. The FCA is encouraging firms to respond by 2 May but no later than 16 May.Topic : Sustainable Finance -
EU Platform on Sustainable Finance report: Streamlining sustainable finance for SMEs
21 March 2025
The Platform on Sustainable Finance, an advisory body to the European Commission (EC) established under Article 20 of the Taxonomy Regulation, has published a report on streamlining sustainable finance for SMEs. Despite the critical role that SMEs play in the transition to a net zero, resilient and environmentally sustainable economy, SMEs face significant challenges in accessing external financing for their sustainability efforts. To address the challenges faced by SMEs in relation to use of the Taxonomy, the Platform proposes a tailored streamlined approach – "the SME sustainable finance standard" – to be used by banks and other financiers to classify the loans or other type of financing they provide to SMEs as sustainable (green or transition) finance and simplify any related voluntary reporting.
Read more.Topic : Sustainable Finance -
ESMA publishes overview of planned consultations for 2025
13 March 2025
The European Securities and Markets Authority has published an overview of its planned consultations for 2025. The consultations relate to workstreams under the EU Listing Act, the Markets in Financial Instruments package, the latest European Market Infrastructure Regulation (known as EMIR 3), the review of the Alternative Investment Fund Managers Directive, sustainable finance and investor protection. ESMA states that it will update the list regularly. -
FCA statement on sustainability regulations and UK defence
11 March 2025
The UK Financial Conduct Authority (FCA) has published a statement confirming that there is nothing in its rules, including its sustainability rules, that prevents investment in or finance for defence companies. The FCA confirms that it is up to individual lenders and investors whether they provide capital to defence companies.
The FCA's sustainability-related rules and regulations include: (i) its Sustainability Disclosure Requirements (SDR), including rules on investment labels for asset managers, and an anti-greenwashing rule applicable to all FCA-authorised firms; (ii) disclosure rules for listed issuers, asset managers and asset owners aligned with the Taskforce on Climate-related Financial Disclosures standards; and (iii) its proposed adoption of the International Sustainability Standards Board's standards in the UK. HM Treasury is also consulting on the proposed regulatory regime for ESG ratings providers. None of these rules require financial institutions to treat companies differently because they are in the defence sector.Topic : Sustainable Finance -
ESMA notifies EC of delay of certain deliverables
6 March 2025
The European Securities and Markets Authority (ESMA) has published a letter (dated 3 March) addressed to the European Commission on the prioritisation of ESMA's 2025 deliverables. ESMA's letter sets out specific items which ESMA intends to delay or which have been cancelled. In some instances the delays are made with the purpose of aligning ESMA's work with other initiatives. For example, the technical standards on buy-in under the Central Securities Depository Regulation Review are delayed until T+1 implementation is complete. The EU has committed to moving to T+1 by 11 October 2027. ESMA identifies the following as being included in its highest priority workstreams: (i) implementation of the latest amendments to the European Market Infrastructure Regulation, known as EMIR 3; (ii) the Markets in Financial Instruments Directive and Regulation Review; (iii) the Listing Act; (iv) the Central Securities Depository Regulation Review; (v) the T+1 project; and (vi) the review of the Alternative Investment Fund Managers Directive. ESMA is also prioritising new supervisory responsibilities relating to Consolidated Tape Providers, Green Bond verifiers, ESG Rating providers and oversight powers under the Digital Operational Resilience Act. -
EC guidance on technical screening criteria published
5 March 2025
A Commission Notice was published in the Official Journal of the European Union on the interpretation and implementation of certain legal provisions of the EU Taxonomy Environmental Delegated Act, the EU Taxonomy Climate Delegated Act and the EU Taxonomy Disclosures Delegated Act. These Delegated Acts supplement the EU's Taxonomy Regulation. The Notice facilitates the effective application of these pieces of legislation by providing clarity on the existing provisions of the legislation. The notice provides technical clarifications in response to frequently asked questions (FAQs) on the: (i) technical screening criteria set out in the Taxonomy Climate Delegated Act and the Taxonomy Environmental Delegated Acts; and (ii) disclosure obligations for the non-climate environmental objectives set out in the amendments to the Taxonomy Disclosures Delegated Act. The Notice should be read with previous Commission Notices that have been published on the EU Taxonomy and its Delegated Acts.Topic : Sustainable Finance -
EC proposes omnibus sustainability package
26 February 2025
The European Commission (EC) has published two omnibus proposals on sustainability and EU investments, designed to address overlapping, unnecessary or disproportionate rules that are creating unnecessary burdens for EU businesses. The package includes amendments to the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and the Carbon Adjustment Mechanism (CBAM). In particular, the proposals seek to make sustainability reporting more accessible and efficient, simplify due diligence to support responsible business practices, strengthen the carbon border adjustment mechanism for a fairer trade and unlock opportunities in European investment programmes.
The package is also accompanied by a draft Taxonomy Delegated Act for public consultation. The EC published a Q&A and press release explaining in further detail the purpose of the omnibus legislation and the changes that are proposed.
Read more.Topic : Sustainable Finance -
EC call for evidence on amendments to Delegated Regulation under Taxonomy Regulation
26 February 2025
The European Commission (EC) has published a call for evidence on a draft Commission Delegated Regulation amending Commission Delegated Regulation 2021/2178 in relation to the simplification of the content and presentation of information to be disclosed concerning environmentally sustainable activities. The draft also proposes amendments to Commission Delegated Regulations 2021/2139 and 2023/2486 as regards simplification of certain technical screening criteria for determining whether economic activities cause no significant harm to environmental objectives. The proposals in the Draft Regulation include a 10% de minimis threshold and excluding from the denominator of the key performance indicators (KPIs) exposures of financial institutions to undertakings with an average number of over 1000 employees until the Commission's review of Delegated Regulation 2021/2178 is finalised. The application of the trading book and the fees and commission KPIs is also postponed until 2027. The EC also proposes to simplify templates such as summary KPIs and 'per activity' information to no longer duplicate elements that are covered by general reporting templates. The call for evidence closes on 26 March.
The EC has also published two omnibus proposals on sustainability and EU investments.Topic : Sustainable Finance -
UK FCA portfolio letter on supervision priorities for asset management and alternatives portfolios
26 February 2025
The UK Financial Conduct Authority (FCA) has published a portfolio letter explaining its current supervision priorities for asset management and alternatives. Firms must discuss this letter with their Board, Executive Committee and accountable Senior Managers to consider whether the risks of harm discussed exist in their firm and implement strategies for managing them.
The FCA's supervisory priorities include:- Supporting confident investing in private assets. The FCA will shortly be releasing its multi-firm review on private market valuation practices. The FCA will also start a multi-firm review on conflicts of interest at firms managing private assets.
- Market integrity and avoiding disruption. Informed by the vulnerabilities identified in the System Wide Explanatory Scenario, the FCA will focus surveillance on prudent risk management, liquidity management and operational resilience.
- Consumer outcomes. The FCA will publish its findings from the ongoing multi-firm review of unit linked funds later this year and will also start a multi-firm review of model portfolio services (MPS). This review of MPS will look at how firms are applying the Consumer Duty, to provide confidence that investors are receiving good outcomes from MPS.
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UK Unauthorised Co-ownership Alternative Investment Funds (Reserved Investor Fund) Regulations 2025 published
26 February 2025
The Unauthorised Co-ownership Alternative Investment Funds (Reserved Investor Fund) Regulations 2025 have been published, along with an explanatory memorandum. The regulations support the Government's introduction of the reserved investor fund (RIF) which will be a new type of UK-based investment fund vehicle legally structured as an unauthorised co-ownership alternative investment fund. The regulations will apply, with modifications, sections 261M to 261O and 261P(1) and (2) of the Financial Services and Markets Act 2000, which currently apply to investors in investment funds that are authorised contractual schemes, to investors in UK-based RIFs (or funds that were RIFs). The Regulations were made on 25 February and come into force when the Co-ownership Contractual Schemes (Tax) Regulations 2025 which establish RIFs come into force, that is 19 March. -
FSB letter to G20 finance ministers and central bank governors ahead of meeting
24 February 2025
The Financial Stability Board (FSB) has published a letter (dated 21 February) to the G20 finance ministers and central bank governors ahead of their meeting on 26 and 27 February. The letter addresses areas of focus for the FSB, including:- Implementation monitoring, providing a strategic review of the FSB's monitoring of 15 years of implementation of reforms. The review is intended to provide valuable insights into the effectiveness of the monitoring of post-global financial crisis regulatory reforms and identify areas where improvements can be made in the tools used to ensure consistent, global implementation of agreed reforms. The FSB will publish a progress report in October.
- Completing the G20 roadmap to enhance cross-border payments. The FSB note that as the work has advanced, many structural issues have become apparent that require concerted efforts to resolve. Addressing these issues calls for significant additional work up to and beyond 2027. The FSB will report in October on progress towards the G20's goal of making cross-border payments faster, cheaper, more transparent, and accessible. The FSB's focus this year is on improving the end-user experience, coordinating closely the work of the Bank for International Settlements Committee on Payments and Market Infrastructures and other partner organisations.
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EBA report on data availability and feasibility of a common methodology for ESG exposures
24 February 2025
The European Banking Authority (EBA) has published a report on the data availability and feasibility of a common methodology for ESG exposures. In accordance with the mandate under Article 501c(1) of Regulation 575/2013 (CRR), this report aims to assess the availability and accessibility of data related to environmental, social and governance (ESG) risks, as well as the feasibility of introducing a standardised methodology for identifying and qualifying banking book credit exposures to ESG risks.
The EBA explores institutions' existing practices and identifies the current challenges in standardising the identification and classification of exposures to ESG risks, building on observations related to data quality and collection, assessment methodologies and available regulatory guidance. The overview of current practices is complemented by an analysis of specific elements covered by the mandate, including sustainability disclosure reporting frameworks, supervisory stress testing and ESG scores in the credit risk ratings of external credit assessment institutions.
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ESMA final report on the European Green Bonds Regulation
14 February 2025
The European Securities and Markets Authority (ESMA) has published a final report on the technical standards on the external reviewer regime under the European Green Bonds Regulation (EuGB). The regime requires external reviews of the pre-issuance factsheet and allocation report after full allocation of proceeds, and imposes certain requirements on external reviewers. The final report covers the regulatory technical standards (RTS) in relation to: (i) assessing senior management, board members and others involved in assessment activities; (ii) assessing sound and prudent management and conflicts of interest management; (iii) assessing knowledge and experience of analysts; and (iv) criteria applicable to outsourcing of assessment activities.
Respondents were broadly in support of ESMA's proposals. However, a key architectural change has been made in that the RTS on assessing knowledge and experience of analysts (under article 28(1) of the EuGB Regulation) has been merged into the RTS on assessing senior management, board members and others involved in assessment activities (under article 23(6) of the EuGB Regulation).
Read more.Topic : Sustainable Finance -
UK FCA expectations for authorised fund applications published
14 February 2025
The UK Financial Conduct Authority (FCA) has published information setting out its expectations for firms applying for collective investment schemes to be authorised as authorised unit trusts, authorised contractual schemes and authorised open-ended investment companies. The information covers specific questions as well as main areas to help applicants understand where they may need to provide further detail. Among other topics, the publication covers the FCA's expectations in relation to environmental, social and governance strategies and sustainability disclosure requirement (SDR) labels, and long-term asset funds which fund managers may find useful. For such funds, the FCA highlights that it expects applications intending to comply with SDR label rules to include the relevant aspects for the specific label as set out in the FCA rules and the FCA's policy statement PS23/16. -
UK FCA delays extending SDR regime to portfolio managers
14 February 2025
The UK Financial Conduct Authority (FCA) has updated its webpage on extending the sustainability disclosure requirements (SDR) and labelling regime to portfolio managers, confirming that it no longer intends to publish a policy statement this year. The FCA had previously stated that, further to consultation paper CP24/8, it would publish a policy statement with final rules in the second half of this year. However, the updated webpage states that the FCA wants to ensure that the extension of the SDR and labelling regime delivers good outcomes for consumers, is practical for firms, and supports growth of the sector and so will continue to reflect on feedback and publish an update in due course. As a reminder, the SDR regime was originally introduced in November 2023, applying a new anti-greenwashing rule to all FCA-authorised firms and a range of disclosure, labelling and naming/marketing requirements to certain UK asset managers.Topic : Sustainable Finance -
EU Platform on Sustainable Finance publishes report on enhancing usability of EU Taxonomy framework
5 February 2025
The EU Platform on Sustainable Finance has published a report on enhancing the usability of the EU's Taxonomy regime. The report takes account of the European Commission's stated ambition to streamline ESG reporting requirements through the proposed Omnibus simplification regulation. The Platform makes four core proposals for simplifying Taxonomy-related reporting.
Read more.Topic : Sustainable Finance -
European Commission communication on EU competitiveness compass
January 29, 2025
The European Commission has published a communication on a Competitiveness Compass for the EU, which sets out an action plan in response to the Draghi report published in September 2024. The communication sets out the framework for the Commission's work on competitiveness for the next five years and lists its initial priorities. One of the Commission's key aims is to reduce the regulatory burden, which for the financial services sector will include publishing, in February, the first of a series of Simplification Omnibus packages relating to sustainable finance reporting, sustainability due diligence and the sustainable finance taxonomy. Additionally in Q1 2025 the Commission will set a strategy on a Savings and Investments Union, followed by a set of specific proposals, which will aim to promote low-cost saving and investment products at EU level for retail investors. Longer term work includes removing barriers to consolidation of financial markets infrastructure and taxation barriers to cross-border investment, promoting the EU's securitization market, and pursuing the reform and harmonization of insolvency frameworks in the EU. A tentative agenda for forthcoming College of Commissioners' meetings indicates that the Commission will publish a communication on the Savings and Investments Union on March 19, 2025. -
EU Platform on Sustainable Finance makes recommendations on the development and assessment of corporate transition plans
January 23, 2025
The EU Platform on Sustainable Finance has published a report on the development and assessment of corporate transition plans. The PSF identifies core elements for evaluating transition plans and makes recommendations to the European Commission on how best to improve the effectiveness of its policy framework and support the market's provision and access to transition finance. In its report, the PSF states that companies should clearly communicate to financial market participants any gaps and how they will be addressed. Financial market participants should then use credible and robust transition plans to help inform their investment and lending decisions, supporting companies in enhancing their plans over time.
The key recommendations addressed in the report include:- developing sectoral transition pathways for high-emitting sectors at the EU level, including technology roadmaps;
- providing guidance for selecting scenarios that can be used for credible science-based corporate target setting and transition planning;
- creating criteria for qualifying targets as credible and science-based;
Read more.Topic : Sustainable Finance -
Financial Stability Board publishes work program for 2025
January 23, 2025
The Financial Stability Board has published its work program for 2025. Priority areas of work for 2025 include:- supporting global cooperation on financial stability: the FSB will continue monitoring global financial stability developments and the implications of emerging financial innovation, and conduct in-depth analysis on vulnerabilities in non-bank financial intermediation and climate change;
- enhancing the resilience of NBFI: while preserving its benefits, the FSB workstream includes finalizing policy recommendations on NBFI leverage, developing and beginning implementation of a medium-term workplan to address issues relating to non-bank data availability, use and quality and analyzing the resilience and functioning of the repo market;
- harnessing the benefits of digital innovation while containing its risks: the FSB will produce a thematic peer review on implementation of its crypto-asset recommendations, a report on how financial authorities can monitor AI adoption and assess related vulnerabilities, and finalize the format for incident reporting exchange;
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European Banking Authority publishes draft guidelines on ESG scenario analysis
January 16, 2025
The European Banking Authority has published a consultation paper on its draft guidelines on ESG scenario analysis. For institutions using the internal ratings-based approach for calculating the own funds requirements for credit risk, these guidelines are intended to specify the way in which ESG risks, and in particular, physical and transition risks stemming from climate change, are taken into account in the scenarios used for credit risk internal stress testing. They: (i) specify the different uses institutions should make of scenario analysis and propose a progressive and proportionate approach to incorporating scenario analysis into the institution management system; (ii) provide guidance on what is required before undertaking a scenario analysis and more specifically on the criteria for setting scenarios and identifying the transmission channels for translating climate risks into financial risks; and (iii) specify the distinctive features to be taken into account when conducting a climate stress test in addition to the requirements set out in the guidelines on institutions' stress testing and the use of scenarios to help define and adjust the institution's strategy and test the robustness of its business model to a range of plausible futures. These guidelines complement the EBA guidelines on the management of ESG risks, published earlier this month. The EBA will hold a virtual public hearing on the consultation on March 17, 2025, and the deadline for comments is April 16, 2025. The EBA plans for the guidelines to be finalized by the second half of 2025, and apply from January 11, 2026 to institutions other than small and non-complex institutions and, at the latest, from January 11, 2027 for SNCI. -
Financial Stability Board analytical framework and toolkit to assess climate-related vulnerabilities
January 16, 2025
The Financial Stability Board published a report containing a framework and analytical toolkit to assess climate-related vulnerabilities. The report introduces an analytical framework that the FSB will use to trace how physical and transition climate risks can be transmitted and amplified by the global financial system. The framework builds on the existing FSB Financial Stability Surveillance Framework and focuses on assessing climate-related vulnerabilities holistically, particularly from a cross-border and cross-sectoral point of view. The accompanying toolkit to the framework comprises three categories of metrics to monitor climate-related vulnerabilities from a forward-looking perspective. These are: (i) proxies to provide early signals on potential drivers of transition and physical risks; (ii) exposure metrics to gauge the extent of direct and indirect exposures in the real economy and the financial system; and (iii) risk metrics to quantify the impacts for financial institutions and the system as a whole. The FSB notes that while these metrics are already used by some FSB members domestically, various methodological and data challenges need to be overcome for them to be used for global monitoring. The FSB notes that the framework and toolkit are live documents, to be refined as understanding evolves on how climate-related vulnerabilities affect financial stability and as methodological and data issues are resolved. As such, the FSB will continue to develop the framework by operationalizing the toolkit and conducting in-depth analyses of specific climate vulnerabilities that may have global financial stability implications. -
European Banking Authority finalizes guidelines on management of ESG risks
January 9, 2025
The European Banking Authority has published its final guidelines on the management of ESG risks. The guidelines set out requirements for institutions for the identification, measurement, management, and monitoring of ESG risks, including through plans aimed at ensuring their resilience in the short, medium, and long term. The guidelines will apply from January 11, 2026, except for small and non-complex institutions for which the guidelines will apply at the latest from January 11, 2027.
The guidelines specify requirements regarding the internal processes and ESG risk management arrangements that institutions should have in place in accordance with the CRD VI. They also specify the content of plans to be prepared by institutions with a view to monitoring and addressing the financial risks stemming from ESG factors, including those arising from the adjustment process towards the objective of achieving climate neutrality in the EU by 2050. The EBA explains that these plans will support the preparedness of institutions for the transition and should be consistent with transition plans prepared or disclosed by institutions under other pieces of EU legislation.Topic : Sustainable Finance -
EU platform on sustainable finance draft report and call for feedback on activities and technical screening criteria to be updated or included in EU Taxonomy
January 8, 2025
The EU Platform on Sustainable Finance has published a draft report on activities and technical screening criteria to be updated or included in the EU taxonomy, with a related call for feedback. The draft report, prepared by the Platform on Sustainable Finance's technical working group, is a deliverable required under the EU Taxonomy Regulation. Responses to the call for feedback may be submitted until February 5, 2025.
The draft report contains preliminary recommendations relating to: (i) the review of the criteria and analysis for the EU Taxonomy Climate Delegated Act; (ii) new activities mandated by the European Commission; (iii) new activities mandated by the European Commission but not completed; and (iv) further recommendations for climate change adaptation.
The Platform on Sustainable Finance explains that the aim is to gather feedback and evidence from a wider set of stakeholders to improve the draft criteria and make them more robust and usable. However, the Platform on Sustainable Finance emphasizes that the call for feedback is not an official Commission consultation.Topic : Sustainable Finance -
EU technical advice on amendments to credit rating agency regulatory framework concerning ESG factors in credit rating methodologies
December 18, 2024
The European Securities and Markets Authority has published technical advice on revisions to Delegated Regulation (EU) 447/2012 and Annex I of the CRA Regulation. The proposed amendments are intended to ensure the better traceability on the incorporation of ESG factors in credit rating methodologies and better disclosure of the relevance of ESG factors to individual credit rating actions. The proposals address the need to update several provisions of Delegated Regulation (EU) No 447/2012 to reflect ESMA's supervisory observations. The technical advice includes ESMA's final proposals following the conclusion of the consultation conducted by ESMA and explains how this feedback has been considered in developing the final technical advice. In addition, Annex III provides ESMA's proposed amendments to Delegated Regulation (EU) No 447/2012 and Annex I of the CRA Regulation. -
EU Platform on Sustainable Finance report on categorization of products under Sustainable Finance Disclosure Regulation
December 17, 2024
The EU Platform on Sustainable Finance has published a report on the categorization of products under the Sustainable Finance Disclosure Regulation. The Platform recommends categorizing products with the following sustainability strategies:- sustainable — contributions through Taxonomy-aligned Investments or Sustainable Investments with no significant harmful activities, or assets based on a more concise definition consistent with the EU Taxonomy;
- transition — investments or portfolios supporting the transition to net zero and a sustainable economy, avoiding carbon lock-ins, in line with the European Commission's recommendations on facilitating finance for the transition to a sustainable economy; and
- ESG collection — excluding significantly harmful investments/activities, investing in assets with better environmental and/or social criteria or applying various sustainability features. All other products should be identified as unclassified products.
The Platform recommends evaluating whether the scope of the categorization should go beyond the current SFDR, potentially categorizing all products and services under sustainability preferences in the Insurance Distribution Directive and the Markets in Financial Instruments Directive. The Platform also recommends that the European Commission develops a common understanding on impact investing in the EU sustainable finance framework and how it relates to the EU Taxonomy and thereafter determines how to integrate it in the categorization scheme. -
UK Financial Markets Standards Board transparency draft statement of good practice on the governance of sustainability-linked products
December 17, 2024
The Financial Markets Standards Board has published a consultation on its transparency draft of its statement of good practice on the governance of sustainability-linked products. SLPs are products whose financial and/or structural characteristics can vary depending on whether the user (i.e., borrower or issuer of, or counterparty to, SLPs) achieves specific sustainability or ESG objectives. They can be used for general corporate purposes, which allows many users (e.g., borrowers, issuers, or counterparties to sustainability-linked products) to access the sustainable finance market in a more flexible way. The FMSB's statement is intended to codify good practice for the governance of SLPs and support consistent approaches across asset classes and jurisdictions. It is hoped this will enhance the quality and integrity of SLPs; boost market confidence; help mitigate greenwashing risk; and support the development of a deeper, more robust sustainability-linked product market. The statement of good practice is intended to apply to service providers (e.g., firms acting as sustainability-linked loan lenders, bookrunners, or lead arrangers on a sustainability-linked bond issuance or counterparties to a sustainability-linked derivative) or users of SLPs in wholesale financial markets and to support, and be read in conjunction with, existing asset-class specific guidance (notably ICMA, LMA, and ISDA principles). The deadline for comments is February 21, 2025. -
European Securities and Markets Authority publishes Q&As on application of guidelines on funds' names using environmental, social, and governance or sustainability-related terms
December 13, 2024
The European Securities and Markets Authority has published three sets of Q&As to provide further detail on the guidelines on funds which use ESG or sustainability-related terms in their names. The guidelines relate to requirements under the Undertakings for Collective Investment in Transferable Securities Directive, the Alternative Investment Fund Managers Directive, and the Cross-Border Distribution of Investment Funds Regulation to act honestly and fairly in conducting their business and to ensure marketing communications are fair, clear, and not misleading. The Q&As have been published separately for UCITS and AIFs but are identical in content.
Read more. -
EU Regulation on environmental, social and governance rating activities published
December 12, 2024
Regulation (EU) 2024/3005 on the transparency and integrity of environmental, social and governance rating activities has been published in the Official Journal of the European Union. The Regulation aims to strengthen the reliability and comparability of ESG ratings by improving the transparency and integrity of the operations that ESG ratings providers carry out and by preventing potential conflicts of interest. ESG ratings providers established in the EU will be authorized and supervised by European Securities and Markets Authority and will have to comply with transparency requirements, in particular with regard to their methodology and sources of information. The Regulation also introduces a requirement for the separation of business and activities to prevent conflicts of interest. The Regulation will enter into force on January 2, 2025. It will apply directly across the EU from July 2, 2026.Topic : Sustainable Finance -
European Commission Publishes Draft FAQs on EU Taxonomy Regulation
November 29, 2024
The European Commission has published a draft notice containing a set of FAQs on the interpretation and implementation of certain legal provisions of the EU Taxonomy Environmental Delegated Act, the EU Taxonomy Climate Delegated Act and the EU Taxonomy Disclosures Delegated Act. Topics covered include: (i) the application of general taxonomy requirements and technical screening criteria for specific activities included in the Taxonomy Climate and Environmental Delegated Acts; (ii) the generic 'do no significant harm' criteria; and (iii) the reporting obligations for activities covered by the Climate Delegated Act and the Environmental Delegated Act. The Commission hopes that the document will improve the usability of the framework.
The draft notice has been approved in principle by the Commission and will be formally adopted once versions in all EU languages are ready.Topic : Sustainable Finance -
Outcome of Basel Committee on Banking Supervision November 2024 Meeting
November 20, 2024
The Basel Committee on Banking Supervision has set out the outcomes from its meeting on November 19-20, 2024. Key takeaways include:- implementation of Basel III—committee members unanimously reaffirmed their expectation of implementing all aspects of the Basel III framework in full, consistently and as soon as possible;
- non-bank financial intermediation—the BCBS approved a final set of guidelines that seek to address weaknesses in banks' counterparty credit risk management exposed in recent episodes of NBFI distress. The finalized guidelines will be published next month;
- 2023 banking turmoil—an update on the BCBS's work to develop a suite of practical tools to support supervisors in their day-to-day work as part of its efforts to strengthen supervisory effectiveness in light of the lessons learned from last year's banking turmoil will be published in early 2025;
- macroprudential policy—the BCBS will publish a report on existing practices to support jurisdictions that wish to apply positive cycle-neutral rates when risks are judged to be neither subdued nor elevated. The report will be published next month; and
- climate-related financial risks—the BCBS anticipates finalizing its proposed Pillar 3 disclosure framework in H1 2025.
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Council of the European Union Adopts new Regulation on Environmental, Social, and Governance Rating Activities
November 19, 2024
The Council of the European Union has adopted the proposed Regulation on ESG rating activities. The new rules aim to strengthen the reliability and comparability of ESG ratings by improving the transparency and integrity of the operations that ESG ratings providers carry out, and by preventing potential conflicts of interest. In particular, ESG rating providers established in the EU will need to be authorized and supervised by ESMA. They will have to comply with transparency requirements, in particular with regard to their methodology and sources of information. The Regulation introduces as a principle a separation of business and activities in order to prevent conflicts of interest. The European Parliament approved the proposed Regulation in October. The Regulation will now be published in the Official Journal of the European Union, enter into force 20 days later and apply 18 months after its entry into force.Topic : Sustainable Finance -
European Supervisory Authorities and European Central Bank Publishes Results of "Fit-For-55" Climate Stress Test
November 19, 2024
The European Supervisory Authorities (European Securities and Markets Authority, European Banking Authority, and European Insurance and Occupational Pensions Authority) and the European Central Bank have published the results of the one-off "Fit-For-55" climate scenario analysis. The EU's Fit-for-55 package aims to stimulate investment and innovation in the transition to a green economy and plays a crucial role in the EU's goal to achieve an emissions' reduction of 55% by 2030 and climate neutrality by 2050. The climate stress test was conducted against three scenarios developed by the European Systemic Risk Board, with the support of the ECB. The scenarios incorporate transition risks as well as macroeconomic factors, under the assumption that the Fit-for-55 package is implemented as planned. Under the scenarios examined, transition risks alone are unlikely to threaten financial stability. However, when transition risks are combined with macroeconomic shocks, they can increase losses for financial institutions and may lead to disruptions. The report therefore calls for a coordinated policy approach to financing the green transition and the need for financial institutions to integrate climate risks into their risk management in a comprehensive and timely manner. The report notes that given the novelty of the methodological approaches and the data-related challenges, the results are subject to a large margin of uncertainty.Topic : Sustainable Finance -
Financial Stability Board Publishes Letter to G20 Leaders and 2024 Annual Report
November 18, 2024
The Financial Stability Board has published a letter sent to the G20 leaders ahead of their meeting on November 18, 2024, together with the FSB 2024 annual report. The letter warns of ongoing vulnerabilities within the global financial system, illustrated by recent episodes of market turmoil and the failure of several banks and non-banks in recent years. The letter stresses the importance of effective implementation of the FSB's policies, emphasizing that authorities must not only put policies into national laws and regulations, but also build the capacity to operationalize them.
In the annual report, the FSB provides an overview of its work in its key priority areas, which include: (i) addressing lessons from the March 2023 banking turmoil; (ii) enhancing the resilience of non-bank financial intermediation; (iii) addressing financial risks from climate change; (iv) improving cross-border payments; (v) responding to technological innovation; and (vi) enhancing the resolvability of central counterparties. Looking ahead, the FSB will continue to focus on these priority areas and will also place an emphasis on: (a) implementation monitoring of its recommendations on crypto-asset activities and global stablecoin arrangements; (b) further work on resolution reforms; and (c) regular monitoring and progress reports on financial stability issues.
For more information on the issues and developments relating to FinTech, see our blog A&O Shearman on fintech and digital assets. -
Mansion House: New Remit Letters for UK Financial Conduct Authority and Prudential Regulation Authority to Focus on Growth
November 15, 2024
HM Treasury has published remits and recommendations for the U.K. Financial Conduct Authority and Prudential Regulation Authority, set out in a letter sent from Rachel Reeves, Chancellor of the Exchequer, to Nikhil Rathi, FCA Chief Executive, and in a letter sent by Ms. Reeves to Andrew Bailey, Bank of England Governor.
The letter to Mr. Bailey formally relates to recommendations for the Prudential Regulation Committee, the BoE committee that exercises its functions as the PRA. Ms. Reeves calls for the regulators to fully embed the secondary competitiveness and growth objective and, while pursuing their respective primary objectives, to consider how they can enable informed and responsible risk-taking by authorized firms. Ms. Reeves outlines her priorities, which include ensuring that: (i) innovative new firms are supported to enter the market, and existing firms are enabled to innovate and invest in new technologies, including the safe adoption of AI; (ii) customers can access appropriate advice and products; (iii) U.K. financial services firms are supported to play a significant role in supporting the Net Zero transition globally; and (iv) firms have a positive experience of engaging with the regulators from the point of initial application or inquiry, and that administrative burdens on firms are streamlined as far as possible, while maintaining high regulatory standards and a reputation as responsive and agile regulators. -
International Organization of Securities Commissions Final Report on Voluntary Carbon Markets
November 14, 2024
The International Organization of Securities Commissions has finalized a report on promoting the financial integrity and orderly functioning of the Voluntary Carbon Markets. The final report includes a set of 21 good practices for Voluntary Carbon Markets to support the financial integrity of carbon credits and carbon markets as Voluntary Carbon Markets continue to develop, with the aim that carbon markets should be fair and orderly, economically sound as to pricing and information flow, and structurally resilient. The good practices address transparency, liquidity, and price discovery, as well as potential fraud or greenwashing, based on IOSCO's objectives of investor protection, fair, efficient, and transparent markets, and reducing systemic risk. The good practices are directed at: (i) relevant regulators and authorities interested in carbon credit markets in their jurisdictions that function with integrity; (ii) trading venues interested in listing and trading high-quality spot carbon credits or carbon credit derivative products; and (iii) relevant market participants.Topic : Sustainable Finance