Topic:

Sustainable Finance
Summary

In May 2018, the Commission adopted a package of measures implementing several key actions announced in its action plan on sustainable finance. The package includes:

A proposal for a regulation on the establishment of a framework to facilitate sustainable investment

• This regulation establishes the conditions and the framework to gradually create a unified classification system ('taxonomy') on what can be considered an environmentally sustainable economic activity. This is a first and essential step in the efforts to channel investments into sustainable activities.

A proposal for a regulation on disclosures relating to sustainable investments and sustainability risks and amending Directive (EU)2016/2341

• This regulation will introduce disclosure obligations on how institutional investors and asset managers integrate environmental, social and governance (ESG) factors in their risk processes. Requirements to integrate ESG factors in investment decision-making processes, as part of their duties towards investors and beneficiaries, will be further specified through delegated acts.

A proposal for a regulation amending the benchmark regulation

• The proposed amendment will create a new category of benchmarks comprising low-carbon and positive carbon impact benchmarks, which will provide investors with better information on the carbon footprint of their investments.

In May, the Commission sought feedback on amendments to delegated acts under the Markets in Financial Instruments Directive (MiFID II) and the Insurance Distribution Directive to include ESG considerations into the advice that investment firms and insurance distributors offer to individual clients.

The Commission intends to clarify how asset managers, insurance companies, and investment or insurance advisors should integrate sustainability risks and, where relevant, other sustainability factors in the areas of organisational requirements, operating conditions, risk management and target market assessment. This will be achieved either by:

• amending existing delegated acts under the UCITS Directive 2009/65/EC, the AIFM Directive 2011/61/EU, the MiFID II Directive 2014/65/EU, the Solvency II Directive 2009/138/EC and the IDD Directive 2016/97, or
• adopting new delegated acts under the same Directives.

In July 2018, the Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) sent a formal request to EIOPA and ESMA for technical advice in this respect. On 26 November, EIOPA followed up with a consultation its draft technical advice on possible amendments to the delegated acts under Solvency II and the Insurance Distribution Directive (IDD).