European Union: ESG And Sustainable Finance - The Disclosure Regulation 02 October 2020 . Articles - Stibbe Luxembourg's Funds Partner Edouard d'Anterroches analyses the advantages and the limits of the European Commission's Draft Regulation aimed at facilitating sustainable investments. On one hand, the SFDR looks at sustainability risks as ESG events or conditions that could cause a material impact on the value of the investment. This webinar is intended for CFOs, corporate treasurers and in-house legal counsel involved in financing. Concerning non-financial undertakings: the advice covers the content of the three KPIs, namely the proportion of turnover, and capital and operating expenditure related to environmentally sustainable activities which must be disclosed and set out specific considerations relating to the methodology for their preparation and presentation. The SFDR imposes requirements on institutions such as banks, insurance companies, pension funds, and investment firms. [2] In terms of financial activities, the SFDR currently applies to financial products (defined in Article 2(12)), investment advice (defined in Article 2(16)), and insurance advice (defined in Article 2(21)). The EU Commission has indicated that the application date of the Implementing Measures could be postponed, possibly until 1 January 2022. ©1996-2020 Morrison & Foerster LLP. The SFDR will start applying in March 2021 and is expected to further shift market appetite towards sustainability-minded companies in their capacities as investees, borrowers, and issuers. Maarten de Bruin, Robert Steeg, Barbra Bulsing, Nicole Meijs. However, the consultation paper does not provide further clarity on the alignment of that principle under the Taxonomy Regulation and SFDR. These transparency obligations require the disclosure of information in the financial sector’s pre-contractual documents[3] and periodic reports, and on websites. Seminar - On Thursday 5 November 2020 (12:00-13:00), Stibbe presents its Debt Finance webinar in Amsterdam. L-1340 Luxembourg, ELVINGER HOSS PRUSSEN, société anonyme Registered with the Luxembourg Bar RCS Luxembourg B 209469 VAT LU28861577, © ELVINGER HOSS PRUSSEN, société anonyme | Registered with the Luxembourg Bar | RCS Luxembourg B 209469 | VAT LU28861577, Foundation, non-profit organisations and philanthropy, Investment firms and other professionals of the financial sector. Sustainable Finance Series – The Companies’ Perspective, Morrison & Foerster LLP based on research provided by ECOFACT. 2. Team: Fons Leijten, Heleen Kersten, Sandra Rietveld. Increasingly, it is demanding these capital providers look at businesses’ sustainability risks and opportunities, as these factors can also ultimately impact capital returns. Regarding the implementation of the Disclosure Regulation, the CSSF has informally confirmed that it will put into place a fast track procedure coupled with a self-certification procedure for prospectus changes limited to the Disclosure Regulation. The CSSF is expected to communicate on prospectus approvals and other outstanding points as soon as possible. The following implementation steps can already be initiated by IFMs in anticipation of 10 March 2021. The SFDR is a key driver in this direction. Team: As recently confirmed, the EU regulation on sustainability-related disclosures in the financial services sector, or SFDR, will go into effect on March 10, 2021, regardless of the market rumors of an official delay of its application or a non-action letter. Reference is made to compliance with minimum safeguards such as the principle of do no significant harm within the meaning of the SFDR. The aim of the Consultation Paper is to ensure a consistent application of the disclosure obligations required under the Taxonomy Regulation by non-financial undertakings and asset managers that fall within scope of the Non-Financial Reporting Directive. By increasing and harmonising transparency on sustainability, the aim of this Regulation is (i) to increase investor confidence and reorient capital flows towards sustainable investments, (ii) to better inform investors on sustainability aspects of their investments, (iii) to ensure comparability of ESG-related information, and (iv) to avoid greenwashing. Concerning asset managers: the advice proposes a KPI calculation model based on eligible investments; this comes together with advice on how this KPI should be calculated and presented to allow uniform disclosure on how the activities are directed at funding environmentally sustainable economic activities. Many requirements provided for in the Disclosure Regulation appear difficult to implement without further clarification, for instance: The European Commission (“EU Commission”) is aware of those issues and will hopefully provide additional guidance in relation to the application of the Disclosure Regulation in the coming weeks. Once adopted, the RTS will give companies clarity about which sustainability indicators will be measured. Last week, ESMA published its Consultation Paper containing ESMA’s draft advice to the European Commission on Article 8 of the Taxonomy Regulation. Article 8 requires undertakings that need to publish non-financial information pursuant to Directive 2014/95/EU (the ‘Non-Financial Reporting Directive’) to include in its non-financial statement information on how and to what extent their activities are associated with economic activities that qualify as environmentally sustainable under the Taxonomy Regulation. It recalled that an economy based on ESG criteria will be more resilient and that a sustainable economy goes hand-in-hand with sustainable finance. The obligations which apply to all IFMs include information on: Additional obligations apply in the case where a financial product (which includes UCITS and AIFs) (i) promotes, among other characteristics, social and/or environmental characteristics, or (ii) has a sustainable investment objective.