Ireland Update: Sustainable Finance Developments
05 May 2020
Renewed Sustainable Finance Strategy
The strategy will provide a roadmap to guide the EU in new actions to increase private investment in environmental, social and governmental ("ESG") projects and activities.
Many of these actions are linked to the objectives set out in the European Green Deal. The strategy will also provide additional enabling frameworks for the European Green Deal Investment Plan.
- "financial market participants"1, such as investment funds that make available financial products;
- firms which are obliged to publish certain non-financial statements under Directive 2013/34/EU (that is, large public-interest entities); and
- measures adopted by Member States or the EU setting out any requirements on financial market participants or issuers of financial products or corporate bonds that are made available as environmentally sustainable.
- substantively contribute to at least one of the six environmental objectives (see below);
- do no significant harm to any of those environmental objectives;
- be carried out in compliance with minimum social and governance safeguards; and
- comply with technical screening criteria which define what “substantially contribute” and "do no significant harm" mean to an environmental objective.
The framework will be based on the following six EU environmental objectives:
- climate change adaptation;
- sustainable use and protection of water and marine resources;
- transition to a circular economy;
- pollution prevention and control;
- protection and restoration of biodiversity and ecosystems; and
- climate change mitigation.
The draft RTS relate to several disclosure obligations under the Disclosure Regulation. The proposals include the following:
- product compliance with the principle of "do not significantly harm" in the draft Taxonomy Regulation;
- entity-level website disclosure of the principal adverse impacts of investment decisions on sustainability factors ; and
- disclosure of the sustainability characteristics or objectives of financial products in an entity's pre-contractual and periodic documentation and on their website.
While COVID-19 will bring some challenges on timing, the taxonomy for climate change mitigation and adaptation should be established by the end of 2020 in order to ensure its full application by the end of 2021. For the four other environmental objectives, the taxonomy should be established by the end of 2021 for application by the end of 2022.
The deadline for comments on the proposed Disclosure Regulation RTS is 1 September 2020. The draft RTS will be submitted to the European Commission as a final report for endorsement before being published in the Official Journal of the EU. Six of the RTS must be delivered to the Commission by 30 December 2020 and one must be delivered by 30 December 2021.
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