European Commission Publishes Regulation on Sustainability-Related Disclosures in Financial Services

A new Regulation on sustainability-related disclosures in the financial services sector has been published in the Official Journal of the European Union. The Regulation is intended to encourage the financial services sector to disclose information about their approaches to sustainability risk and consideration of adverse sustainability impacts in the course of their businesses, as part of wider EU efforts to combat climate change and other sustainability-related issues. Climate change and sustainable finance are particular areas of focus for the EU.  In June 2019, the European Banking Authority published its action plan on sustainable finance, setting out how it intends to deliver on its aims to help combat environmental, social and governance risks, with a particular focus on environmental factors and climate change in its initial phase of work. The Regulation applies to “financial market participants”, which is defined to include investment firms that provide portfolio management, alternative investment funds managers and banks (credit institutions) which provide portfolio management. Investment firms that provide investment advice but employ fewer than three persons are exempt from the Regulation.
 
Key provisions under the Regulation include:

• Mandatory publication on firms’ websites of information about the integration of sustainability risks into their decision-making processes and investment advice;
• Mandatory publication on firms’ websites of adverse sustainability impacts arising from firms’ investment decisions;
• Inclusion of pre-contractual disclosures on the integration of sustainability risks into investment decisions and the likely impacts of sustainability on investment returns; and
• Publication of information explaining how remuneration policies are consistent with the integration of sustainability risks on their websites.

The Regulation will come into force on December 29, 2019. The majority of the provisions will apply from March 10, 2021.
 
View the EU Regulation on sustainability-related disclosures.

View details of the EBA's action plan on sustainable finance.

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