Infographic on Sustainable Finance

An expert group on Sustainable Finance that was set up by the European Commission. Its work started in 2018, and its mandate ends in September 2020. The TEG has four subgroups. The Taxonomy subgroup worked on an EU classification system for environmentally sustainable activities (the so-called EU Taxonomy). Based on these recommendations, the Taxonomy Regulation has been developed. It was published in the Official Journal of the European Union.

An expert group on Sustainable Finance that was set up by the European Commission. Its work started in 2018, and its mandate ends in September 2020. The TEG has four subgroups. The Green Bond subgroup worked on recommendations for the development of an EU Green Bond Standard, in order to increase the transparency and comparability of the green bond market.

An expert group on Sustainable Finance that was set up by the European Commission. Its work started in 2018, and its mandate ends in September 2020. The TEG has four subgroups. The Climate Disclosure subgroup worked recommendations that led to new climate reporting guidelines by the European Commission which are now a supplement to the guidelines on non-financial reporting.

An expert group on Sustainable Finance that was set up by the European Commission. Its work started in 2018, and its mandate ends in September 2020. The TEG has four subgroups. The Benchmark subgroup worked on recommendations on minimum standards for the methodology of the ‘EU Climate Transition’ and ‘EU Paris-aligned’ benchmarks as well as disclosure requirements on Environmental, Social and Governance (ESG) factors of benchmark methodologies.

This expert group is set up due to article 20 of the Taxonomy Regulation. The group was announced in October 2020. It will advise the Commission on technical screening criteria for the EU Taxonomy, on a review of the Taxonomy regarding social objectives, on sustainable finance policy in general, and it will monitor and report on capital flows towards sustainable investments.

This is a group of states. Its objective is to  scale up the mobilization of private capital towards environmentally sustainable investments. Its current members are Argentina, Canada, Chile, China, the EU, India, Indonesia, Kenya, Morocco, New Zealand, Norway, Senegal, Singapore, and Switzerland.

The Joint Committee has the aim to strengthen the cooperation between the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA), collectively known as the three European Supervisory Authorities (ESAs). The Disclosures Regulatio gives mandate to this committee to develop requirements for ESG disclosures.

The EFRAG develops and promotes European views in international debates in the field of financial reporting. EFRAG provides advice to the European Commission. Several groups exist within the EFRAG, such as the European Corporate Reporting Lab. Currently, a European Lab Project Task Force on preparatory work for the elaboration of possible European non-financial reporting standards is being established. 

The Taxonomy Regulation (2020/852) aims to establish an EU classification system for sustainable economic activities. In June 2020, the Taxonomy Regulation was published in the Official Journal of the European Union. The regulations tasks the Commission with establishing a list of environmentally sustainable activities by defining technical screening criteria for six environmental objectives. These criteria will be established through delegated acts by the end of 2021.

In January 2019 the European Commission published draft rules on how investment firms and insurance distributors should take sustainability issues into account when advising clients. The ESMA gave technical advice to the European Commission on integrating sustainability risks in MiFID II. In June 2020, the Commission published draft delegated acts to amend the Markets in Financial Instruments Directive (MiFID II) (2014/65/).

In January 2019 the European Commission published draft rules on how investment firms and insurance distributors should take sustainability issues into account when advising clients. EIOPA gave technical advice to the European Commission on the integration of sustainability risks and factors in the delegated acts under Solvency II and IDD. In June 2020, the Commission published draft delegated acts to amend the Insurance Distribution Directive (IDD) (2016/97).

The Disclosure Regulation (2019/2088) regulates sustainability-related disclosures in the financial sector. The regulation aims to provide harmonized disclosure requirements for investment products which promote environmental and/or social objectives and that have sustainable investments as their objective. It was published in November 2019 and will apply from March 2021 onward.

The European Banking Authority (EBA) has the mandate to work on Sustainable Finance issues e.g. to improve the regulatory framework and to provide supervisors with tools to assess ESG risks – this mandate of the EBA to work on ESG factors is based on e.g. the Capital Requirements Regulation (CRR 2), the Capital Requirements Directive (CRD5), the Investment Firms Regulation (IFR), and the Investment Firms Directive (IFD).

The Non-Financial Reporting Directive (2014/95) established the rules on disclosure of non-financial and diversity information by companies. Companies misz report on environmental protection, social responsibility, respect for human rights, anti-corruption and bribery and diversity. Currently, this directive is under revision. The revised draft will likely be presented by the European Commission in Q1 2020.

Building on the work of the TEG, the Commission explores options for a legislative initiative for an EU Green Bond Standard (GBS). The decision on how and in what legal form to establish an EU GBS, will be made on the basis of the outcome of the targeted consultation on the EU GBS, and will be taken in the context of the Renewed Sustainable Finance Strategy.

This strategy of the European Securities and Markets Authority (ESMA) sets out how the ESMA will embedding Environmental, Social, and Governance (ESG) factors in its work. The key priorities for ESMA include transparency obligations, risk analysis on green bonds, ESG investing, convergence of national supervisory practices on ESG factors, taxonomy, and supervision.

In July 2020, the European Commission published a study on sustainable coporate governance. The objective of this study was to assess the root causes of “short termism” in corporate governance, discuss their relationship with current market practices and/or regulatory frameworks, and identify potential EU legislative and non-legislative options. A public consultation on this topic has been launched in Q4 2020.

In January 2020, the European Commission published a study on due diligence requirements through the supply chain. The study identifies practices and perceptions regarding regulatory options. It also assesses options, ranging from no intervention to mandatory due diligence as a legal standard of care and considers economic, social, human rights, and environmental impacts. A public consultation on this topic has been launched in Q4 2020.