The Sustainability Disclosure Regime of the European Union

The International Capital Markets Association (‘ICMA’) summarizes ESG related disclosure set forth by a range of legislative measures and policy initiatives out of the European Commission, including:

The EU Taxonomy for Sustainable Activities (‘EUT’)

• Article 8: firms subject to the Non-Financial Reporting Directive (‘NFRD’) and the future proposed Corporate Sustainability Reporting Directive (‘CSRD’) will be required to disclose their level of EUT-Alignment
• Delegated Act: further specifies disclosure by financial and non-financial companies under Article 8

Sustainable Finance Disclosure Regulation (‘SFDR’)

• SFDR: effective 10 March 2021: aims improve sustainability disclosure of certain financial products and issuers/originators of such products
• Regulatory Technical Standards (‘RTS’): effective 1 July 2022: specifies content, methodologies and presentation of disclosures under SFDR at a product and an entity level.

Non-Financial Reporting Directive (‘NFRD’)

• NFRD: revised to improve disclosure by financial market participants including asset managers and pension providers
• CSRD: ensures relevant non-financial information is available from investee companies to facilitate integration among EU disclosure regulations
• European Financial Reporting Advisory Group (‘EFRAG’): CSRD proposes that EFRAG draft mandatory sustainability reporting standards starting 1 January 2024 covering FY 2023.

 Low Carbon Benchmark Regulation

• EU Climate Transition and EU Paris Aligned Benchmarks: requires benchmark providers to disclosure whether and how they take ESG factors into account

Credit Rating Regulation

• European Securities and Market Authority (‘ESMA’): effective 2019: credit rating agencies must disclose consideration of ESG factors