1 Feb, 2022

Sustainable Finance Regulatory Update: January 2022


2022 has kicked off in earnest with busy schedules and the winter holidays seeming like only a distant memory for many of us. ESG regulators have not made an exception in this regard and started off the year with a range of noteworthy developments and announcements regarding ESG disclosure and transparency rules that will be implemented over the coming year.

EU Taxonomy: will nuclear and natural gas make the cut?

The experts at the EU Platform on Sustainable Finance have published a response to the EU Commission opining that nuclear energy and natural gas “could not be considered sustainable” as per the remit of the Taxonomy and their inclusion could pose “a serious risk … undermining the sustainable Taxonomy framework”. The final shape of the delegated act is still to be determined after a lengthy political process. And the ‘greenness’ of nuclear energy and natural gas is still to be decided. Read more

EBA publishes binding standards on Pillar 3 bank disclosures on ESG risks.

On 24 January, the European Banking Authority published its final draft implementing technical standards (ITS) on Pillar 3 disclosures on ESG risks. The standards put forward comparable disclosures and KPIs, including a green asset ratio (GAR) and a banking book taxonomy alignment ratio (BTAR), as a tool to show how institutions are embedding sustainability considerations in their risk management, business models and strategy and their pathway towards the Paris agreement goals. Once approved by the European Commission, EU banks will have to start making ESG disclosures in 2023, with full phase-in by June 2024. Read more

ESMA Consultation on MIFID II Sustainability Guidelines review

EU securities regulator ESMA has launched a consultation on a requirement for financial firms to collect data regarding clients’ preferences for sustainable investment products and subsequently propose products which meet those preferences. The proposals follow revisions to suitability requirements under the MiFID II regulations. The consultation closes on 27 April 2022. ESMA expects to publish a final report in Q3 2022.  Read more

UK FCA Climate related disclosure regime comes into effect

The rules, which are phased in from January 2022, are closely aligned to the Task Force on Climate-Related Financial Disclosures (TCFD) Recommendations. They require in-scope firms to make annual firm-level disclosures relating to how they take climate-related risks and opportunities into account when managing their investments as well as product-level disclosures. Read more

India set to become the first country to regulate ESG ratings providers

The Indian securities regulator Securities and Exchange Board of India (SEBI) published a set of draft rules on 24 January 2022, according to which providers of ESG ratings and commentary would have to obtain accreditation from SEBI, to be reviewed every two years. The initiative focuses on scrutinizing the processes and policies each data provider follows regarding transparency, methodology and conflict of interest. The deadline to respond to SEBI’s consultation is 10 March. It is likely that other regulators such as the UK’s FCA, ESMA and the European Commission might soon follow suit towards regulating the ESG data market. Read more

US SEC expected to introduce new ESG disclosures in 2022

The US Securities and Exchange Commission (SEC) is expected to propose mandatory ESG-related disclosure rules in early 2022. Even without specific requirements, any ESG-related material impacts should be disclosed under existing SEC rules. Some of the priorities and areas of interest include: disclosure and compliance issues related to investment advisers and fund ESG strategies, greenwashing and proxy voting. Read more

Other news

  • The Hong Kong Monetary Authority (HKMA) published the results of its pilot climate risk stress test (CRST). Read more
  • Bursa Malaysia announces the enhanced requirements in the Main and ACE Market Listing Requirements (“the Listing Requirements”), aimed at further strengthening board independence, quality, and diversity.  Read more
  • International Sustainability Board (ISSB) commences its streamlining of the sustainability disclosure landscape. Read more