The three European Supervisory Authorities (EBA, EIOPA and ESMA - ESAs) issued a Consultation Paper seeking input on proposed environmental, social and governance (ESG) disclosure standards for financial market participants, advisers and products.
These standards have been developed under the EU Regulation on sustainability-related disclosures in the financial services sector (SFDR), aiming to:
- strengthen protection for end-investors;
- improve disclosures from financial market participants and financial advisers to investors; and
- improve financial products disclosures to investors.
The SFDR enables the ESAs to develop Regulatory Technical Standards (RTS) on the content, methodology and presentation of ESG disclosures at entity and product level. The consultation paper also proposes a framework to facilitate sustainable investment (Taxonomy Regulation).
Entity-level Adverse Impact Disclosures
Entities should disclose on their websites any investment decisions which have adverse impacts on the:
- climate and the environment; and
- social and employee matters, respect for human rights, anti-corruption and anti-bribery matters.
The ESAs have included draft indicators for adverse impacts, based on consultations with the Joint Research Centre of the European Commission and the European Environment Agency.
Product Level ESG Disclosures
The sustainability characteristics or objectives of financial products should be disclosed in their pre-contractual and periodic documentation and on their website. The draft RTS proposed rules for executing this disclosure, ensuring transparency on product sustainability. The RTS also establishes additional disclosures that should be provided by products that have designated an index as a reference benchmark.
The ESAs invite feedback to this consultation by September 1, 2020. Once the consultation is closed, the draft RTS will be finalized and submitted to the European Commission.
To read the full article, click here.
Compliance and Regulatory Consulting
Local and global compliance expertise for the financial services industry.
Expert compliance support for a variety of firms including hedge funds, private equity firms, wealth managers, corporate finance and broker dealers.
FCA Authorization Application for Financial Services
Comprehensive FCA Authorization support.
Comprehensive compliance and regulatory support for FCA authorized firms.
Senior Managers and Certification Regime (SM&CR) Consulting and Implementation Support
A comprehensive range of support and solutions to all firms and individuals subject to SM&CR.
Comprehensive compliance and regulatory support for EU firms.