The European Commission adopted three delegated regulations on Friday 17 July setting minimum technical requirements for EU climate benchmarks and a number of environmental, social and governance (ESG) disclosure requirements.
The new requirements are based on the work of the Technical Expert Group on Sustainable Finance (TEG), which delivered its final report on this issue on 30 September 2019 (see EUROPE 12338/17).
The first delegated act defines the technical requirements that a benchmark index must include in order to be labelled as a climate transition benchmark or an benchmark aligned with the Paris Accord, the creation of which was agreed by the co-legislators in February 2019 (see EUROPE 12202/12).
Companies in the index will also be required to reduce their carbon emissions from year to year and exclude assets that significantly harm the ESG targets.
The planned requirements maintain a degree of flexibility in the design of the benchmarks methodology, in order to allow the market to develop innovative strategies and adapt to the specific needs of investors, the Commission clarifies.
The other two delegated acts deal with the explanation given in the prior declaration on how the ESG factors are reflected and published for each benchmark as well as the minimum content of the explanation on how the ESG factors are reflected in the methodology for constructing the benchmarks.
On this point, the Commission states that, although it broadly agrees with the approach suggested by the TEG, it has departed from its final report in a number of cases in order to provide more clarity on the set of indicators and on the information that benchmarking administrators are expected to disclose.
In particular, it abandoned the TEG’s idea of a ‘green-to-brown ratio’ as well as the recommendation to make it compulsory to publish the way in which ESG objectives are included in all benchmarks, regardless of their nature.
See texts: https://bit.ly/2DTwU35 (Original version in French by Marion Fontana)