On Thursday 23 April, the three European financial supervisory authorities (ESAs) launched a public consultation on their draft regulatory technical standards (RTS) to supplement the regulation that determines how institutional investors should integrate environmental, social and governance (ESG) factors into their investment decision-making (see EUROPE 12209/14).
The joint consultation paper proposes a series of indicators to identify negative effects on the environment at the company level as well as in the social domain, respect for human rights and the fight against corruption.
In particular, the ESAs consider that the best approach is to use a “core set of mandatory indicators that will always lead to principal adverse impacts of investment decisions on sustainability factors”.
These indicators would be considered as leading to the main negative environmental effects regardless of the outcome of the assessment by the financial market participant. Additional indicators for environmental and social factors could be used to identify, assess and prioritize the main additional adverse effects.
As for sustainability objectives for financial products, the ESAs are of the opinion that they should be disclosed in pre-contractual and periodic product documentation and on the company’s website. In addition, they recommend the use of a mandatory reporting template for pre-contractual disclosure.
The paper also sets out proposals on how information should be presented to show that a financial product complies with the “do no significant harm” principle referred to in the Regulation laying down the EU taxonomy for sustainable finance (see EUROPE 12468/30).
The ESAs are responsible for drafting additional technical standards on this principle before 30 December 2020, but they have decided to include some proposals directly in this paper so that they can already be subject to public consultation.
Stakeholders have until 1 September to provide comments. Based on the results of the public consultation, the ESAs will finalise their draft RTS, which will be then submitted to the European Commission for adoption.
See the paper: https://bit.ly/2zhB9my (Original version in French by Marion Fontana)