As a key part of the EU’s … It is therefore essential that financial market participants and financial advisers provide the information necessary to enable end investors to make informed investment decisions. 2. (10)  Directive (EU) 2016/2341 of the European Parliament and of the Council of 14 December 2016 on the activities and supervision of institutions for occupational retirement provision (IORPs) (OJ L 354, 23.12.2016, p. 37). Such divergent measures and approaches would continue to cause significant distortions of competition because of significant differences in disclosure standards. Financial market participants shall ensure that any information published in accordance with Article 3, 5 or 10 is kept up to date. The disclosures regulation was adopted by co-legislators in spring 2019 and was published on 9 December 2019 in the Official Journal. The European Supervisory Authorities (ESAs) welcome comments on this survey setting out the details of the presentation of the information to be disclosed pursuant to Article 8(3), Article 9(5) and Article 11(4) of … 3. Financial market participants shall publish and maintain on their websites: where they consider principal adverse impacts of investment decisions on sustainability factors, a statement on due diligence policies with respect to those impacts, taking due account of their size, the nature and scale of their activities and the types of financial products they make available; or. (11)  Regulation (EU) No 345/2013 of the European Parliament and of the Council of 17 April 2013 on European venture capital funds (OJ L 115, 25.4.2013, p. 1). End date: 16 Oct 2020. Therefore, it is appropriate to set out more specific and standardised disclosure requirements with regard to such investments. It shall be published in a way that is accurate, fair, clear, not misleading, simple and concise and in a prominent easily accessible area of the website. In order to take the temperature of financial market participants’ (FMPs) understanding and level of readiness for the major changes foreseen, we conducted a survey among FMPs between June and September 2020. The new Sustainable Finance Disclosure Regulation (SFDR)1 introduced various disclosure-related requirements for financial market participants and financial advisors at entity, service and product level. What is the SFDR? This document is an excerpt from the EUR-Lex website, Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector (Text with EEA relevance), OJ L 317, 9.12.2019, p. 1–16 (BG, ES, CS, DA, DE, ET, EL, EN, FR, GA, HR, IT, LV, LT, HU, MT, NL, PL, PT, RO, SK, SL, FI, SV), In force: This act has been changed. OVERVIEW . 1. Use, Other sites managed by the Publications Office, http://data.europa.eu/eli/reg/2019/2088/oj, Portal of the Publications Office of the EU. Financial market participants shall publish and maintain on their websites the following information for each financial product referred to in Article 8(1) and Article 9(1), (2) and (3): a description of the environmental or social characteristics or the sustainable investment objective; information on the methodologies used to assess, measure and monitor the environmental or social characteristics or the impact of the sustainable investments selected for the financial product, including its data sources, screening criteria for the underlying assets and the relevant sustainability indicators used to measure the environmental or social characteristics or the overall sustainable impact of the financial product; the information referred to in Articles 8 and 9; the information referred to in Article 11. The consideration of sustainability factors in the investment decision‐making and advisory processes can realise benefits beyond financial markets. The ESAs shall, through the Joint Committee, develop draft regulatory technical standards to specify the details of the content and presentation of information referred to in paragraph 1. The European Union’s new Sustainable Finance Disclosure Regulation (SFDR) – also known as the Disclosure Regulation – comes into effect in March 2021. 2. To ensure the orderly and effective monitoring of compliance with this Regulation, Member States should rely on the competent authorities already designated under those rules. Where EuSEF managers make available information on the positive social impact that is the objective of a given fund, on the overall social outcome achieved and on the related methods used in accordance with Regulation (EU) No 346/2013, they might, where appropriate, use such information for the purposes of the disclosures under this Regulation. The competent authorities shall have all the supervisory and investigatory powers that are necessary for the exercise of their functions under this Regulation. The Sustainable Finance Disclosure Regulation will however come into force on 10 March 2021. With the SFDR set to redefine ESG disclosures and make a significant impact on financial market participants in Europe, the short timeline and ambiguity on several vital details are … The ESAs shall, through the Joint Committee, develop draft regulatory technical standards to specify the details of the presentation and content of the information to be disclosed pursuant to this Article. Where financial market participants, taking due account of their size, the nature and scale of their activities and the types of financial products they make available, consider principal adverse impacts, whether material or likely to be material, of investment decisions on sustainability factors, they should integrate in their processes, including in their due diligence processes, the procedures for considering the principal adverse impacts alongside the relevant financial risks and relevant sustainability risks. an investment company authorised in accordance with Directive 2009/65/EC which has not designated a management company authorised under that Directive for its management; an insurance intermediary which provides insurance advice with regard to IBIPs; an insurance undertaking which provides insurance advice with regard to IBIPs; a credit institution which provides investment advice; an investment firm which provides investment advice; an AIFM which provides investment advice in accordance with point (b)(i) of Article 6(4) of Directive 2011/61/EU; or. 1. When developing the draft regulatory technical standards referred to in the first subparagraph of this paragraph, the ESAs shall take into account the various types of financial products, their objectives as referred to in paragraphs 1, 2 and 3 and the differences between them as well as the objective that disclosures are to be accurate, fair, clear, not misleading, simple and concise. Principal adverse impacts should be understood as those impacts of investment decisions and advice that result in negative effects on sustainability factors. COM(2018) 354 final. When developing the draft regulatory technical standards referred to in the first subparagraph, the ESAs shall take into account the various types of financial products, their characteristics and the differences between them, as well as the objective that disclosures are to be accurate, fair, clear, not misleading, simple and concise. Proposal for a regulation on disclosures relating to sustainable investments and sustainability risks and amending Directive (EU) 2016/2341 Text of the proposal, impact assessment and summary of the impact assessment Feedback statement on the public consultation on institutional investors and asset managers' duties regarding sustainability 2. It does so in relation to the integration of sustainability risks by financial market participants (i.e. The Commission should be empowered to adopt those implementing technical standards by means of an implementing act pursuant to Article 291 TFEU and in accordance with Article 15 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010. For the purposes of paragraph 1 of this Article, financial market participants may use the information in management reports in accordance with Article 19 of Directive 2013/34/EU or the information in non‐financial statements in accordance with Article 19a of that Directive where appropriate. The publication of the Regulation (EU) 2019/2088 of the European Parliament and of the Council on sustainability‐related disclosures in the financial services sector (the “Regulation”) on 9 December 2019 marks a new milestone in the European Union’s journey towards a more sustainable financial sector and is a major step in the Action Plan. Directives 2009/65/EC (4), 2009/138/EC (5), 2011/61/EU (6), 2013/36/EU (7), 2014/65/EU (8), (EU) 2016/97 (9), (EU) 2016/2341 (10) of the European Parliament and of the Council, and Regulations (EU) No 345/2013 (11), (EU) No 346/2013 (12), (EU) 2015/760 (13) and (EU) 2019/1238 (14) of the European Parliament and of the Council share the common objective of facilitating the uptake and pursuit of the activities of undertakings for collective investment in transferable securities (UCITS), credit institutions, alternative investment fund managers (AIFMs) which manage or market alternative investment funds, including European long‐term investment funds (ELTIFs), insurance undertakings, investment firms, insurance intermediaries, institutions for occupational retirement provision (IORPs), managers of qualifying venture capital funds (EuVECA managers), managers of qualifying social entrepreneurship funds (EuSEF managers) and providers of pan‐European personal pension products (PEPPs). In … According to the World Economic Forum (WEF), the cost of natural disasters worldwide was USD165 billion in 2018, more than the gross domestic product (GDP) of Hungary in 2018 (EUR157 billion). A National Climate … EU Taxonomy Solution. 1. However, the form and presentation required by that Directive is not, always suitable for direct use by financial market participants and financial advisers when dealing with end investors. 4. In recent months, the Sustainable Finance Disclosure Regulation (SFDR) has been sparking almost as much debate as the EU Taxonomy – both cornerstone regulations of the EU Sustainable Finance Action Plan. By way of derogation from paragraph 2 of this Article, Article 4(6) and (7), Article 8(3), Article 9(5), Article 10(2), Article 11(4), and Article 13(2) shall apply from 29 December 2019 and Article 11(1) to (3) shall apply from 1 January 2022. of Global GDP by the end of 20301. Where financial advisers deem sustainability risks not to be relevant, the descriptions referred to in the first subparagraph shall include a clear and concise explanation of the reasons therefor. SUSTAINABLE FINANCE DISCLOSURE REGULATION KEY REQUIREMENTS The EU’s Regulation on sustainability-related disclosures in the financial services sector (the SFDR) was published in December 9 and forms part of the EU’s package of measures relating to Environmental, Social and Governance (ESG) issues. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010. Save for later; Climate change is considered to be one of the most significant threats to financial stability. 1. The ESAs shall, through the Joint Committee, develop draft regulatory technical standards to specify the details of the presentation and content of the information to be disclosed pursuant to this Article. Peter Stapleton and Eimear O’Dwyer of our Funds & Investment … 2. Analysis & Insights Webinar: EU Sustainable Finance Disclosure Regulation Peter Stapleton and Eimear O’Dwyer of our Funds & Investment Management team discuss the newly adopted EU Sustainable Finance Disclosure Regulation, which will become applicable in less than a year, in a webinar in association with AIMA. New EU regulations on sustainable finance and associated investor expectations pose challenges for fund managers. on sustainability‐related disclosures in the financial services sector (Text with EEA relevance) Article 1. This article, however, focuses only on the obligations which apply to IFMs (as defined in this article). As a consequence, as regards the financial products with environmental or social characteristics, financial market participants should disclose whether and how the designated index, sustainability index or mainstream index, is aligned with those characteristics and where no benchmark is used, information on how the sustainability characteristics of the financial products are met. The creation of a … As we noted in our briefing on the EBA's Action Plan on sustainable … Since annual reports in principle summarise business results for complete calendar years, the provisions of this Regulation regarding the transparency requirements for such reports should not apply until 1 January 2022. Sustainability-related disclosure in the financial services sector, This site is managed by the Directorate-General for Communication, action plan on financing sustainable growth, proposal for a regulation on disclosures relating to sustainable investments and sustainability risks, Aid, Development cooperation, Fundamental rights, Follow the European Commission on social media. 1. Consultation. The closest regulation to come into force is the Sustainable Finance Disclosure Regulation – in short SFDR. (16)  Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/79/EC (OJ L 331, 15.12.2010, p. 48). ESG Disclosures for Asset... Investment Funds Update ESG Disclosures for Asset Managers Under the EU Sustainable Finance Disclosure Regulation and Taxonomy Regulation (14)  Regulation (EU) 2019/1238 of the European Parliament and of the Council of 20 June 2019 on a Pan-European Personal Pension Product (PEPP) (OJ L 198, 25.7.2019, p. 1). It can increase the resilience of the real economy and the stability of the financial system. 5. Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector (Text with EEA relevance) The Technical Expert Group on sustainable finance (TEG) was set up in July 2018 to assist the Commission in the implementation of the action plan and the regulation, in particular the minimum standards for EU climate transition and EU Paris-aligned Benchmarks, and the content and form of the ESG disclosure requirements. Where the sustainability risk assessment leads to the conclusion that there are no sustainability risks deemed to be relevant to the financial product, the reasons therefor should be explained. Financial market participants shall include in the information to be disclosed pursuant to Article 6(1) and (3) an indication of where the methodology used for the calculation of the index referred to in paragraph 1 of this Article is to be found. Brussels,24.5.2018. The newly adopted European Regulation on Sustainable Finance Disclosure will become applicable in less than a year. EBA, EIOPA and ESMA (collectively, the ‘ESAs’) should be mandated, through the Joint Committee, to develop draft regulatory technical standards to further specify the content, methodologies and presentation of information in relation to sustainability indicators with regard to climate and other environment‐related adverse impacts, to social and employee matters, to respect for human rights, and to anti‐corruption and anti‐bribery matters, as well as to specify the presentation and content of the information with regard to the promotion of environmental or social characteristics and sustainable investment objectives to be disclosed in pre‐contractual documents, annual reports and on websites of financial market participants in accordance with Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010. Articles 8 and 9 of the Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability related disclosures in the financial services sector A National Climate Assessment study forecasted that climate-related natural disasters will reach 10 percent of the global GDP by the end of the century1. Having regard to the opinion of the European Economic and Social Committee (1). Financial market participants which consider the principal adverse impacts of investment decisions on sustainability factors should disclose in the pre‐contractual information for each financial product, concisely in qualitative or quantitative terms, how such impacts are considered as well as a statement that information on the principal adverse impacts on sustainability factors is available in the ongoing reporting. Transparency of sustainability risk policies. Substantial Contribution. IORPs shall publish and maintain the information referred to in Articles 3 to 7 and the first subparagraph of Article 10(1), of this Regulation in accordance with point (f) of Article 36(2) of Directive (EU) 2016/2341. The European Supervisory Authorities (ESAs) welcome comments on this survey setting out the details of the presentation of the information to be disclosed pursuant to Article 8 (3), Article 9 (5) and Article 11 (4) of the Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services (SFDR). 1. (19)  Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) (OJ L 352, 9.12.2014, p. 1). 2. 1. (20)  Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014 (OJ L 171, 29.6.2016, p. 1). 1. Disclosures Regulation. sustainable finance This Regulation lays down harmonised rules for financial market participants and financial advisers on transparency with regard to the integration of sustainability risks and the consideration of adverse sustainability impacts in their processes and the provision of sustainability‐related information with respect to financial products. (3) Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014 (OJ L 171, 29.6.2016, p. 1). Investment decisions and the assessment of relevant risks, including environmental, social and governance risks, should be made in such a manner as to ensure compliance with the interests of members and beneficiaries of IORPs. 2. The information referred to in paragraph 1 of this Article shall be disclosed in the following manner: for AIFMs, in the annual report referred to in Article 22 of Directive 2011/61/EU; for insurance undertakings, annually in writing in accordance with Article 185(6) of Directive 2009/138/EC; for IORPs, in the annual report referred to in Article 29 of Directive (EU) 2016/2341; for managers of qualifying venture capital funds, in the annual report referred to in Article 12 of Regulation (EU) No 345/2013; for managers of qualifying social entrepreneurship funds, in the annual report referred to in Article 13 of Regulation (EU) No 346/2013; for manufacturers of pension products, in writing in the annual report or in a report in accordance with national law; for UCITS management companies, in the annual report referred to in Article 69 of Directive 2009/65/EC; for investment firms which provide portfolio management, in a periodic report as referred to in Article 25(6) of Directive 2014/65/EU; for credit institutions which provide portfolio management, in a periodic report as referred to in Article 25(6) of Directive 2014/65/EU; for PEPP providers, in the PEPP Benefit Statement referred to in Article 36 of Regulation (EU) 2019/1238. Under Directive (EU) 2016/2341, IORPs are already required to apply governance and risk‐management rules to their investment decisions and risk assessments in order to ensure continuity and regularity. Divergent disclosure standards and market‐based practices make it very difficult to compare different financial products, create an uneven playing field for such products and for distribution channels, and erect additional barriers within the internal market. The European Commission published new Regulations on harmonised requirements in respect of sustainability-related disclosures and benchmarks contributing to sustainable finance (EU/2019/2089) (the “Disclosure Regulation”) in the Official Journal on 9 December 2019. 2. Where financial market participants deem sustainability risks not to be relevant, the descriptions referred to in the first subparagraph shall include a clear and concise explanation of the reasons therefor. These efforts include major regulatory changes to help the EU reach its goal of net-zero carbon emissions by 2050 and maintain a stable and sustainable financial system. The regulation (EU) 2019/2088 on Sustainable Finance Disclosure Regulation (SFDR) introduces new requirements and clarifies the sustainability-related disclosure obligations in the financial services sector. Where financial market participants make available a financial product as referred to in Article 8(1) or in Article 9(1), (2) or (3), they shall include a description of the following in periodic reports: for a financial product as referred to in Article 8(1), the extent to which environmental or social characteristics are met; for a financial product as referred to in Article 9(1), (2) or (3): the overall sustainability‐related impact of the financial product by means of relevant sustainability indicators; or. Transparency of the promotion of environmental or social characteristics in pre‐contractual disclosures. The ESAs shall take stock of the extent of voluntary disclosures in accordance with point (a) of Article 4(1) and point (a) of Article 7(1). In so doing, it can ultimately impact on the risk‐return of financial products. The EU Taxonomy, the Sustainable Finance Disclosure Regulation (SFDR), and the Non-Financial Reporting Directive (NFRD) form the bedrock of Sustainable Finance. The Sustainable Finance Disclosure Regulation; The Taxonomy Regulation ; In summary, the Non-Financial Reporting Directive (NFRD) requires large EU “public interest” corporates (including many financial services firms) to publish data on the impact their activities have on ESG factors. EUROPEAN COMMISSION. In such case, the definition of pension product in point (8) of Article 2 of this Regulation shall be deemed to include the pension products referred to in the first sentence. Where a financial market participant applies point (b) of Article 4(1), the disclosures referred to in Article 6(3) shall include for each financial product a statement that the financial market participant does not consider the adverse impacts of investment decisions on sustainability factors and the reasons therefor. on disclosures relating to sustainable investments and sustainability risks and amending Directive (EU) 2016/2341 To enhance transparency and inform end investors, access to information on how financial market participants and financial advisers integrate relevant sustainability risks, whether material or likely to be material, in their investment decision making processes, including the organisational, risk management and governance aspects of such processes, and in their advisory processes, respectively, should be regulated by requiring those entities to maintain concise information about those policies on their websites. The proposal was adopted as part of the sustainable finance package. (4)  Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, p. 32). Transparency by IORPs and insurance intermediaries. The ESAs shall update the regulatory technical standards in the light of regulatory and technological developments. By 30 December 2021, the ESAs shall develop, through the Joint Committee, draft regulatory technical standards in accordance with Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010 on the content, methodologies and presentation of information referred to in paragraphs 1 to 5 of this Article in respect of sustainability indicators in relation to adverse impacts in the field of social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters. REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL. Transparency of the promotion of environmental or social characteristics and of sustainable investments on websites. an insurance product which is made available to a professional investor and which offers a maturity or surrender value that is wholly or partially exposed, directly or indirectly, to market fluctuations; ‘alternative investment fund manager’ or ‘AIFM’ means an AIFM as defined in point (b) of Article 4(1) of Directive 2011/61/EU; ‘investment firm’ means an investment firm as defined in point (1) of Article 4(1) of Directive 2014/65/EU; ‘portfolio management’ means portfolio management as defined in in point (8) of Article 4(1) of Directive 2014/65/EU; ‘institution for occupational retirement provision’ or ‘IORP’ means an institution for occupational retirement provision authorised or registered in accordance with Article 9 of Directive (EU) 2016/2341 except an institution in respect of which a Member State has chosen to apply Article 5 of that Directive or an institution that operates pension schemes which together have less than 15 members in total; a pension product as referred to in point (e) of Article 2(2) of Regulation (EU) No 1286/2014; or. According to the European Commission’s Action Plan: Financing Sustainable Growth (2018) ‘Sustainable finance’ generally refers to “the process of taking due account of environmental and social considerations in investment decision-making, leading to increased investments in longer-term and sustainable activities. The new Sustainable Finance Disclosure Regulation (SFDR) 1 introduced various disclosure-related requirements for financial market participants and financial advisors at entity, service and product level. where they do not consider adverse impacts of investment decisions on sustainability factors, clear reasons for why they do not do so, including, where relevant, information as to whether and when they intend to consider such adverse impacts. The Sustainable Finance Disclosure Regulation. Sustainable finance – EU classification system for green investments Gustav Mahlerplein 62, 1082 MA Amsterdam, The Netherlands +31 (0)20 235 86 00 | info@inrev.org | www.inrev.org 17 December 2020 INREV* welcomes the opportunity to contribute to the European Commission’s consultation on a draft delegated act under the Taxonomy Regulation. This Regulation seeks to achieve more transparency regarding how financial market participants and financial advisers integrate sustainability risks into their investment decisions and investment or insurance advice. Transparency of the promotion of environmental or social characteristics and of sustainable investments in periodic reports. For the purposes of this Regulation, the competent authorities shall cooperate with each other and shall provide each other, without undue delay, with such information as is relevant for the purposes of carrying out their duties under this Regulation. As a business, we are extremely supportive of such proactive government engagement – it is something we … INREV values the work done by the High-Level Expert … (15)  Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC (OJ L 331, 15.12.2010, p. 12). Since the crisis of 2008, new and important regulations have been developed for the financial sector. … ESMA aims to ensure that the financial markets support and promote this shift by integrating environmental, social and governance (ESG) factors across its core activities. Member States shall notify the Commission and the ESAs of any decision taken pursuant to paragraph 2. The disclosure regulation will detail how financial market participants and financial advisors must … 2. Transparency of adverse sustainability impacts at entity level. 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