SpringerLink
Log in

Sustainability Disclosure in the EU Financial Sector

  • Chapter
  • First Online:
Sustainable Finance in Europe

Part of the book series: EBI Studies in Banking and Capital Markets Law ((ESBCML))

  • 239 Accesses

Abstract

This chapter analyses and discusses the European Union (EU) Sustainable Finance Disclosure Regulation (SFDR). The aim is twofold. On the one hand, it explores the main features of the SFDR. On the other hand, it tries to assess whether the SFDR is likely to succeed in harmonizing sustainability-related disclosure rules and fiduciary duties, not only across Member States, but also across financial products and distribution channels. The author concludes that there is still a long way to go. Research shows that the phenomenon of greenwashing is still widespread among investment funds. Also, the EU is not an island. The author argues that there are roughly two opposite scenarios. In a pessimistic scenario, the more lenient or even non-existent sustainability agenda of other geopolitical powers gives them a competitive edge that is detrimental to the EU. In a positive scenario, the EU becomes a global standard-setter in the area of sustainability. The USA’s re-entry in the Paris Climate Agreement under the Biden Administration and its success in delivering a climate bill as part of the Inflation Reduction Act (IRA) may give us some hope. Finally, on 9 December 2022, the UK Government announced a major reform of its financial services regulation ‘to drive growth and competitiveness in the financial services sector’ (the Edinburgh reforms). In this context, the UK Government ‘is ensuring that the financial system plays a major role in the delivery of the UK’s Net Zero target and is acting to secure the UK as the best place in the world for responsible and sustainable investment’. Will these developments contribute to the EU becoming a global standard-setter in the area of sustainability? Time will tell.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution

Subscribe and save

Springer+ Basic
EUR 32.99 /Month
  • Get 10 units per month
  • Download Article/Chapter or Ebook
  • 1 Unit = 1 Article or 1 Chapter
  • Cancel anytime
Subscribe now

Buy Now

Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 169.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Hardcover Book
USD 219.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free ship** worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    COM(2018) 97 final, 8 March 2018, 1.

  2. 2.

    See for the latest version of the CMU Action Plan: COM(2020) 590 final, and https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/capital-markets-union/capital-markets-union-2020-action-plan_en (accessed on 23 December 2023). The Green Deal was presented by the Commission on 10 December 2019 (COM(2019) 640 final). See for an overview of the Green Deal plans: https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal_en (accessed on 23 December 2023). The European Climate Law has been adopted as Regulation (EU) 2021/1119.

  3. 3.

    COM(2018) 97 final, 3.

  4. 4.

    COM(2018) 97 final, 4–11. See also the follow-up FSAP: COM(2021) 390 final. Cf. COM/2023/317 def.

  5. 5.

    Regulation (EU) 2020/852 (below: the Taxonomy Regulation).

  6. 6.

    Art 9, Taxonomy Regulation.

  7. 7.

    See art 3, opening words, and (a) and (b) Taxonomy Regulation.

  8. 8.

    See art 3, opening words, and (c) Taxonomy Regulation. More specifically, the economic activity concerned is carried out in compliance with the required minimum safeguards if there is alignment with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight fundamental conventions identified in the Declaration of the International Labour Organisation on Fundamental Principles and Rights at Work and the International Bill of Human Rights. See art 18(1) Taxonomy Regulation.

  9. 9.

    See art 3, opening words, and (d) Taxonomy Regulation.

  10. 10.

    The Taxonomy Climate Delegated Act (Regulation (EU) 2021/2139) establishes ‘technical screening criteria’ for determining the exact conditions under which a concrete economic activity qualifies as contributing substantially to (a) climate change mitigation or (b) climate change adaptation, and for determining whether that economic activity causes no significant harm to any of the other environmental objectives.

  11. 11.

    The Taxonomy Climate Delegated Amendment Act (Regulation (EU) 2022/1214).

  12. 12.

    See https://www.greenpeace.org/eu-unit/issues/climate-energy/46570/greenpeace-to-take-european-commission-to-court-over-controversial-gas-and-nuclear-greenwashing/ (accessed on 23 December 2023); https://www.ipe.com/news/austria-files-lawsuit-against-taxonomy-with-european-court-of-justice/10062641.article (accessed on 23 December 2023).

  13. 13.

    C(2023) 3851 final.

  14. 14.

    See art 6 Delegated Act (EU) 2023/2486.

  15. 15.

    An amendment of the Taxonomy Climate Delegated Act entered into force on 1 January 2024 and added activities to the taxonomy that contribute substantially to climate change mitigation and adaptation, see Delegated Regulation (EU) 2023/2485. See further on the Taxonomy Regulation Chapter 13 of this volume.

  16. 16.

    Regulation (EU) 2019/2088, as later amended by the Taxonomy Regulation (below: SFDR). To complement the SFDR disclosure requirements, sustainability preferences of (potential) clients must be included in (1) individual portfolio management, (2) investment advice and (3) insurance advice with regard to insurance-based investment products (IBIPs). See for the integration of sustainability preferences of (potential) clients in individual portfolio management, investment advice and insurance advice with regard to IBIPs, as well as for other changes to integrate sustainability considerations into the existing MiFID II, IDD, UCITS, AIFMD and Solvency II frameworks: (i) MiFID II Commission Delegated Regulation (EU) 2021/1253; (ii) MiFID II Commission Delegated Directive 2021/1269; (iii) IDD Delegated Regulation (EU) 2021/1257; (iv) AIFMD Commission Delegated Regulation (EU) 2021/1255; (v) UCITS Commission Delegated Directive (EU) 2021/1270; (vi) Solvency II Delegated Regulation (EU) 2021/1256. See Chapter 17 of this volume. See also FE Mezzanotte, ‘Accountability in EU Sustainable Finance: Linking the Client’s Sustainability Preferences and the MiFID II Suitability Obligation’ (2021) 4 Capital Markets Law Journal 482.

  17. 17.

    The two consultation documents can be found at https://finance.ec.europa.eu/sustainable-finance/disclosures/sustainability-related-disclosure-financial-services-sector_en (accessed on 23 December 2023).

  18. 18.

    More specifically, art 2(1) SFDR defines ‘financial market participants’ as (i) insurance undertakings which make available IBIPs; (ii) investment firms and credit institutions providing individual portfolio management; (iii) managers of various collective investment schemes, and (iv) several entities involved in pension products. NB: Member States may decide (Member State option) to apply the SFDR to manufacturers of pension products operating ‘national social security schemes’ which are covered by Regulations (EC) No 883/2004 and (EC) No 987/2009. In such cases, manufacturers of pension products as referred to in art 2(1)(d) SFDR include manufacturers of pension products operating national social security schemes and of pension products referred to in art 2(8) SFDR. In such a case, the definition of pension product in art 2(8) SFDR is deemed to include pension products with regard to national social security schemes. See art 16(1) SFDR. Member States must notify the Commission and the European Supervisory Authorities EBA, ESMA and EIOPA (the ESAs) of any decision taken pursuant to art 16(1) SFDR (art 16(2) SFDR).

  19. 19.

    More specifically, art 2(11) SFDR defines ‘financial advisers’ as (i) insurance intermediaries and insurance undertakings providing insurance advice with regard to IBIPs; (ii) investment firms and credit institutions providing investment advice; and (iii) managers of collective investment schemes providing investment advice. NB: the SFDR does not apply to (i) insurance intermediaries providing insurance advice with regard to IBIPs, and (ii) investment firms providing investment advice, if they employ fewer than three persons, irrespective of their legal form, including natural persons (art 17(1) SFDR). Member States may however decide (Member State option) to apply the SFDR in such cases (art 17(2) SFDR). Member States must notify the Commission and the ESAs of any such decision (art 17(3) SFDR).

  20. 20.

    Cf recital (9) SFDR.

  21. 21.

    Please note that I quoted Recital (10) as very slightly reformulated in Joint Consultation Paper, ESG Disclosures, Draft regulatory technical standards with regard to the content, methodologies, and presentation of disclosures pursuant to Article 2a, Article 4(6) and (7), Article 8(3), Article 9(5), Article 10(2) and Article 11(4) of Regulation (EU) 2019/2088 (JC 2020 16), on 6.

  22. 22.

    Art 1 SFDR. ‘Financial product’ is defined as (a) an individually managed portfolio; (b) a collective investment scheme; (c) an insurance-based investment product (IBIP); (d) a pension product or pension scheme; and (e) a pan-European Personal Pension Product (PEPP). NB: Member States may decide (Member State option) to apply the SFDR to manufacturers of pension products operating ‘national social security schemes’ which are covered by Regulations (EC) No 883/2004 and (EC) No 987/2009. In such cases, manufacturers of pension products as referred to in art 2(1)(d) SFDR include manufacturers of pension products operating national social security schemes and of pension products referred to in art 2(8) SFDR. In such a case, the definition of pension product in art 2(8) SFDR is deemed to include pension products operating national social security schemes. See art 16(1) SFDR. Member States must notify the Commission and the ESAs of any decision taken pursuant to art 16(1) SFDR (art 16(2) SFDR).

  23. 23.

    Art 68 Delegated Regulation (EU) 2022/1288 (below: SFDR Delegated Regulation).

  24. 24.

    Art 2 SFDR Delegated Regulation.

  25. 25.

    Please note that the content of the templates has been changed partially on 20 February 2023 by the SFDR Amendment Delegated Regulation (Delegated Regulation (EU) 2023/363) to take into account information about the exposure of financial products to investments in natural gas and nuclear energy. This information must be provided under the Taxonomy Climate Delegated Amendment Act (Delegated Regulation (EU) 2022/1214), which contains the technical screening criteria for climate change mitigation and adaptation for additional economic activities in the energy sectors that were not included in the Taxonomy Climate Delegated Act (Delegated Regulation (EU) 2021/2139), in particular natural gas and nuclear energy.

  26. 26.

    Art 2(22) SFDR.

  27. 27.

    More specifically, art 2(17) SFDR defines ‘sustainable investment’ as: (1) an investment in an economic activity that contributes to an environmental objective, as measured, for example, by key resource efficiency indicators on: (a) the use of energy, renewable energy, raw materials, water and land; (b) the production of waste; (c) greenhouse gas emissions, and (d) biodiversity and the circular economy, or (2) an investment in an economic activity that contributes to a social objective, in particular: (a) an investment that contributes to tackling inequality, or (b) an investment that fosters social cohesion, social integration and labour relations, or (c) an investment in human capital or economically or socially disadvantaged communities, provided (i) that the investments set out in (1) and (2) above ‘do not significantly harm’ any of those environmental and social objectives and (ii) that the investee companies follow good governance practices, in particular with respect to sound management structures, employee relations, remuneration of staff and tax compliance. The SFDR Delegated Regulation further specifies (i) the content and (ii) the presentation of the information in relation to the principle of ‘do no significant harm’ referred to in the definition of ‘sustainable investment’ set out above. See consideration (22), arts 22, 39, 67, Table I, II and III of Annex I, SFDR Delegated Regulation. Article 5 and recital (19) of the Taxonomy Regulation clarify that ‘sustainable investments’ include investments into environmentally sustainable activities within the meaning of the Taxonomy Regulation. See also European Commission (Ref.Ares(2021)4,556,843–14/07/2021) (https://www.esma.europa.eu/sites/default/files/library/sfdr_ec_qa_1313978.pdf (accessed on 23 December 2023, at p. 5).

  28. 28.

    Article 2(17) SFDR; Article 3 Taxonomy Regulation. But please note that the creation of a ‘social’ taxonomy is envisaged. See Platform on Sustainable Finance, Final Report on Social Taxonomy (28 February 2022) (https://commission.europa.eu/document/d07e1f1e-3a1f-4d55-add4-a130f26b33e3_en, accessed on 23 December 2023). In this document, the Platform on Sustainable Finance proposes a structure for a social taxonomy.

  29. 29.

    See arts 9 and 8 SFDR, respectively.

  30. 30.

    However, an art 9 product, in order to meet requirements in accordance with prudential, product-related sector-specific rules may next to ‘sustainable investments’, also include investments for certain specific purposes such as hedging or liquidity which, in order to fit the overall financial product’s sustainable investments’ objective, have to meet minimum environmental or social safeguards, i.e. investments or techniques for specific purposes must be in line with the sustainable investment objective. Since art 9 SFDR remains neutral in terms of the product design, or investing styles, investment tools, strategies or methodologies to be employed or other elements, the product documentation must include information on how the given mix complies with the ‘sustainable investment’ objective of the financial product in order to comply with the ‘no significant harm principle’ of Article 2(17) SFDR. See European Commission (Ref.Ares(2021)4556843–14/07/2021) 5–6 (https://www.esma.europa.eu/sites/default/files/library/sfdr_ec_qa_1313978.pdf (accessed on 23 December 2023).

  31. 31.

    See also European Commission (Ref.Ares(2021)4556843–14/07/2021) 6–8 (https://www.esma.europa.eu/sites/default/files/library/sfdr_ec_qa_1313978.pdf (accessed on 23 December 2023).

  32. 32.

    See also European Commission (Ref.Ares(2021)4556843–14/07/2021) 8 https://www.esma.europa.eu/sites/default/files/library/sfdr_ec_qa_1313978.pdf (accessed on 23 December 2023).

  33. 33.

    See art 6 SFDR.

  34. 34.

    Art 2(24) SFDR.

  35. 35.

    See further Sect. 14.2 (under the heading ‘Financial Market Participants: Transparency of Principal Adverse Sustainability Impacts on the Website’ and Sect. 14.3 (under the heading ‘Financial Market Participants: Transparency on Adverse Sustainability Impact’).

  36. 36.

    See COM(2023) 314 final. See for the final compromise text dated 9 February 2024: https://data.consilium.europa.eu/doc/document/ST-6255-2024-INIT/en/pdf. See further on ESG-ratings Chapter 16 of this volume.

  37. 37.

    See COM(2021) 390 final, 3. See for the CSRD itself: Directive (EU) 2022/2464. See also CSRD Delegated Regulation (EU) 2023/2772 which further specifies the sustainability reporting obligations included in the CSRD.

  38. 38.

    See art 1 and recitals (17) ff. CSRD (arts 19a and 29a, amending Directive 2013/34/EU (as amended by Directive 2014/95/EU, i.e. by the Non-Financial Reporting Directive or NFRD)). The application of the CSRD will take place in four stages: (i) reporting in 2025 on the financial year 2024 for companies already subject to the NRFD; (ii) reporting in 2026 on the financial year 2025 for large companies that are not currently subject to the NFRD; (iii) reporting in 2027 on the financial year 2026 for listed SMEs (except micro undertakings), small and non-complex credit institutions and captive insurance undertakings; (iv) reporting in 2029 on the financial year 2028 for third-country undertakings with net turnover above 150 million in the EU if they have at least one subsidiary or branch in the EU exceeding certain thresholds. See art 4 CSRD and https://www.consilium.europa.eu/en/press/press-releases/2022/11/28/council-gives-final-green-light-to-corporate-sustainability-reporting-directive/ (accessed on 23 December 2023). See further on the CSRD Chapter 6 of this volume.

  39. 39.

    See COM(2022) 71 final (below: CSDDD).

  40. 40.

    Large companies are those that exceed certain thresholds. For the exact requirements, see art. 2 CSDDD.

  41. 41.

    See art. 4 read in conjunction with art. 5 to 11 CSDDD. In addition, the CSDDD contains the obligation for the largest companies to have a Climate Change Action Plan (CCAP), see art. 15 CSDDD.

  42. 42.

    See COM(2022) 71 final, p. 4–6.

  43. 43.

    See https://data.consilium.europa.eu/doc/document/ST-6145-2024-INIT/en/pdf (accessed on 15 April 2024). See Art. 3(1)(iv) CSDDD for the list of  financial institutions covered by the CSDDD. See for the review clause Art. 29(1) CSDDD. See further on the CSDDD Chapter 4 of this volume.

  44. 44.

    Regulation (EU) 2023/2859. The ESAP Regulation was announced as Action 1 of the CMU Action Plan 2020 (COM(2020) 590 final).

  45. 45.

    Art 3(1) (financial market participants) and (2) (financial advisers) SFDR. Financial market participants that qualify as Institutions for Occupational Retirement Provision (IORPs) must publish and maintain the information referred to in art 3(1) in accordance with point (f) of art 36(2) of Directive (EU) 2016/2341 (IORP Directive), see art 15(1) SFDR. Financial advisers that qualify as insurance intermediaries must communicate the information referred to in art 3(2) SFDR in accordance with art 23 of Directive (EU) 2016/97 (IDD), see art 15(2) SFDR.

  46. 46.

    Art 12(1) (financial market participants) and (2) (financial advisers) SFDR.

  47. 47.

    Art 2(24) SFDR.

  48. 48.

    Art 4(1), opening words, and (a) SFDR. Financial market participants that qualify as IORPs must publish and maintain the information referred to in art 4(1), opening words, and (a) SFDR in accordance with point (f) of art 36(2) of Directive (EU) 2016/2341 (IORP Directive), see art 15(1) SFDR.

  49. 49.

    Art 4(2) SFDR, as further specified in arts 4–10 and Annex I (Template principal adverse sustainability impacts statement) of the SFDR Delegated Regulation. On 28 July 2022, the three ESAs published their first annual report on the publication of principal adverse sustainability impacts statements under the SFDR, featuring a provisional, indicative list of best—and bad—practices (JC 2022 35).

  50. 50.

    This is further specified in art 7 and Table 1 of Annex I SFDR Delegated Regulation. Where information relating to any of the indicators used is not readily available, financial market participants shall include in the section ‘Description of policies to identify and prioritize principal adverse impacts on sustainability factors’ in Table 1 of Annex I details of the best efforts used to obtain the information either directly from investee companies, or by carrying out additional research, cooperating with third party data providers or external experts or making reasonable assumptions (art 7(2) SFDR Delegated Regulation). At this early stage, the data required to calculate adverse impacts according to the relevant indicators will often not be readily available and cannot be obtained directly from investee companies, which means that the entities subject to the SFDR will often be dependent on third-party data providers claiming to have access to the required information. See also Sect. 14.1 (under the heading ‘Reliable Sustainability-related Company Information’).

  51. 51.

    This is further specified in art 6 and Table 1 of Annex I SFDR Delegated Regulation.

  52. 52.

    See art 3 g (Engagement Policy) of Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the exercise of certain rights of shareholders in listed companies [2007] OJ EU L184/17, as amended by (1) Directive 2014/59/EU [2014] OJ EU L173/90 and (2) Directive (EU) 2017/828 [2017] OJ EU L131/1.

  53. 53.

    This is further specified in art 8 and Table 1 of Annex I SFDR Delegated Regulation.

  54. 54.

    Ibid.

  55. 55.

    Art (4)(1), opening words, and (b) SFDR, further specified in art 12 SFDR Delegated Regulation. Financial market participants that qualify as IORPs must publish and maintain the information referred to in art 4(1), opening words, and (b) SFDR in accordance with point (f) of art 36(2) of Directive (EU) 2016/2341 (IORP Directive), see art 15(1) SFDR.

  56. 56.

    As referred to in art 3(7) of Directive 2013/34/EU.

  57. 57.

    Art 2(24) SFDR.

  58. 58.

    Art 2(24) SFDR.

  59. 59.

    Art 4(5), opening words, and sub (a) SFDR, as further specified in art 11 SFDR Delegated Regulation. Financial advisers that qualify as insurance intermediaries must communicate the information referred to in art 4(5), opening words, and sub (a) SFDR in accordance with art 23 of Directive (EU) 2016/97 (IDD), see art 15(2) SFDR.

  60. 60.

    See recital (8), first sentence, SFDR Delegated Regulation. Information provided by financial advisers on whether and how they take into account principal adverse impacts on sustainability factors within their investment or insurance advice should therefore clearly describe how the information from financial market participants is processed and integrated in their investment or insurance advice. In particular, financial advisers that rely on criteria or thresholds concerning principal adverse impacts on sustainability factors that are used to select, or advise on, financial products, should publish those criteria or thresholds. See recital (8), second sentence onwards, SFDR Delegated Regulation.

  61. 61.

    Art 4(5), opening words, and sub (b) SFDR, as further specified in art 13 SFDR Delegated Regulation. Financial advisers that qualify as insurance intermediaries must communicate the information referred to in art 4(5), opening words, and sub (b) SFDR in accordance with art 23 of Directive (EU) 2016/97 (IDD), see art 15(2) SFDR.

  62. 62.

    Art 2(22) SFDR.

  63. 63.

    Art 5(1) SFDR. Financial market participants that qualify as IORPs must publish and maintain the information referred to in art 5(1) SFDR in accordance with point (f) of art 36(2) of Directive (EU) 2016/2341 (IORP Directive), see art 15(1) SFDR. Financial advisers that qualify as insurance intermediaries must communicate the information referred to in art 5(1) SFDR in accordance with art 23 of Directive (EU) 2016/97 (IDD), see art 15(2) SFDR.

  64. 64.

    In particular, Directives 2009/76/EC (UCITS); 2009/138/EC (Solvency II); 2011/61/EU (AIFMD); 2013/36/EU (CRD IV); 2014/65/EU (MiFID II); (EU) 2016/97 (IDD); and (EU) 2016/2341 (IORPs), see art 5(2) SFDR.

  65. 65.

    Art 12(1) (financial market participants) and (2) (financial advisers) SFDR.

  66. 66.

    See art 6(3) SFDR: for (a) alternative investment fund managers (AIFMs), in the disclosures to investors referred to in art 23(1) of Directive 2011/61/EU; (b) insurance undertakings, in the provision of information referred to in art 185(2) of Directive 2009/138/EC or, where relevant, in accordance with art 29(1) of Directive (EU) 2016/97; (c) IORPs, in the provision of information referred to in art 41 of Directive (EU) 2016/2341; (d) managers of qualifying venture capital funds, in the provision of information referred to in art 13(1) of Regulation (EU) No 345/2013; (e) managers of qualifying social entrepreneurship funds, in the provision of information referred to in art 14(1) of Regulation (EU) No 346/2013; (f) manufacturers of pension products, in writing in good time before a retail investor is bound by a contract relating to a pension product; (g) management companies for undertakings for collective investments in transferable securities (UCITS), in the prospectus referred to in art 69 of Directive 2009/65/EC; (h) investment firms which provide portfolio management or provide investment advice, in accordance with art 24 (4) of Directive 2014/65/EU; (i) credit institutions which provide portfolio management or provide investment advice, in accordance with art 24(4) of Directive 2014/65/EU; (j) insurance intermediaries and insurance undertakings which provide insurance advice with regard to IBIPs and for insurance intermediaries which provide insurance advice with regard to pension products exposed to market fluctuations, in accordance with art 29(1) of Directive (EU) 2016/97; (k) AIFMs of European Long-Term Investment Funds (ELTIFs), in the prospectus referred to in art 23 of Regulation (EU) 2015/760; and (l) PEPP providers, in the PEPP key information document referred to in art 26 of Regulation (EU) 2019/1238.

  67. 67.

    Art 2(22) SFDR.

  68. 68.

    Ibid.

  69. 69.

    Art 6(1), opening words, sub (a) and (b) (financial market participants) and art 6(2), opening words, sub (a) and (b) (financial advisers) SFDR. Financial market participants that qualify as IORPs must publish and maintain the information referred to in art 6(1), opening words, sub (a) and (b) SFDR in accordance with point (f) of art 36(2) of Directive (EU) 2016/2341 (IORP Directive), see art 15(1) SFDR. Financial advisers that qualify as insurance intermediaries must communicate the information referred to in art 6(2), opening words, sub (a) and (b) SFDR in accordance with art 23 of Directive (EU) 2016/97 (IDD), see art 15(2) SFDR.

  70. 70.

    Art 6(1), second paragraph (financial market participants) and art 6(2), second paragraph (financial advisers) SFDR. Financial market participants that qualify as IORPs must publish and maintain the information referred to in art 6(1), second paragraph SFDR in accordance with point (f) of art 36(2) of Directive (EU) 2016/2341 (IORP Directive), see art 15(1) SFDR. Financial advisers that qualify as insurance intermediaries must communicate the information referred to in art 6(2), second paragraph, SFDR in accordance with art 23 of Directive (EU) 2016/97 (IDD), see art 15(2) SFDR.

  71. 71.

    Art 3 Taxonomy Regulation; art 7 Taxonomy Regulation.

  72. 72.

    See Sect. 14.2.

  73. 73.

    Art 2(24) SFDR.

  74. 74.

    Ibid.

  75. 75.

    Art 7(1), opening words, and sub (a) and sub (b) SFDR. Financial market participants that qualify as IORPs must publish and maintain the information referred to in art 7(1), opening words, sub (a) and (b) SFDR in accordance with point (f) of art 36(2) of Directive (EU) 2016/2341 (IORP Directive), see art 15(1) SFDR.

  76. 76.

    See Sect. 14.2.

  77. 77.

    Art 7(2) SFDR. Financial market participants that qualify as IORPs must publish and maintain the information referred to in art 7(2) SFDR in accordance with point (f) of art 36(2) of Directive (EU) 2016/2341 (IORP Directive), see art 15(1) SFDR.

  78. 78.

    Art 8(1), opening words, and sub (a) and (b) SFDR, as further specified in arts 14–17, 20 and the template set out in Annex II and IV SFDR Delegated Regulation.

  79. 79.

    Art 9 Taxonomy regulation.

  80. 80.

    See on this term art 3 Taxonomy Regulation.

  81. 81.

    As defined in art 3 Taxonomy Regulation.

  82. 82.

    Art 6, paragraph 1, Taxonomy Regulation, read in conjunction with art 5 Taxonomy regulation. See, to the same effect, art 8(2a) SFDR, as further specified in arts 14–17, 20 and the template set out in Annex II and IV SFDR Delegated Regulation.

  83. 83.

    The ‘do no significant harm’ principle is an element in the definition of ‘sustainable investment’ set out in art 2(17) SFDR.

  84. 84.

    Art 3 Taxonomy Regulation; art 6, second paragraph onwards, Taxonomy Regulation. See, to the same effect, art 8(2a) SFDR, as further specified in arts 14–17, 20 and the template set out in Annex II SFDR Delegated Regulation.

  85. 85.

    Art 8(2) SFDR, as further specified in arts 14–17, 20 and the template set out in Annex II and IV SFDR Delegated Regulation.

  86. 86.

    Art 2(17) SFDR.

  87. 87.

    Art 9(1) SFDR, as further specified in arts 18–19, 21–22 and the template set out in Annex III SFDR Delegated Regulation.

  88. 88.

    Art 2(17) SFDR.

  89. 89.

    Art 9(2) SFDR, as further specified in arts 18–19, 21–22 and the template set out in Annex III SFDR Delegated Regulation.

  90. 90.

    Art 2(17) SFDR.

  91. 91.

    Art 9 Taxonomy Regulation.

  92. 92.

    Art 3 Taxonomy Regulation.

  93. 93.

    Art 3 Taxonomy Regulation.

  94. 94.

    Art 9(4a) SFDR read in conjunction with art 5 Taxonomy Regulation, as further specified in arts 18–19, 21–22 and the template set out in Annex III SFDR Delegated Regulation.

  95. 95.

    Art 9(3), first paragraph, SFDR, as further specified in arts 18–19, 21–22 and the template set out in Annex III SFDR Delegated Regulation.

  96. 96.

    See art 3(1)(23a) Regulation (EU) 2016/1011.

  97. 97.

    See art 3(1)(23b) Regulation (EU) 2016/1011.

  98. 98.

    Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014 (OJ L 171, 29 June 2016, 1).

  99. 99.

    Art 9(3), second paragraph, SFDR, as further specified in arts 18–19, 21–22 and the template set out in Annex III SFDR Delegated Regulation.

  100. 100.

    Art 9(4) SFDR, as further specified in arts 18–19, 21–22 and the template set out in Annex III SFDR Delegated Regulation.

  101. 101.

    Art 2(17) SFDR.

  102. 102.

    Ibid.

  103. 103.

    Art 10(1), first paragraph, SFDR, as further specified in arts 24–36 (art 8 products) and arts 37–49 (art 9 products) SFDR Delegated Regulation. Financial market participants that qualify as IORPs must publish and maintain the information referred to in art 10(1), first subparagraph, SFDR in accordance with point (f) of art 36(2) of Directive (EU) 2016/2341 (IORP Directive), see art 15(1) SFDR. According to art 15(2) SFDR, even though insurance intermediaries do not qualify as financial market participants (but as financial advisers), they must communicate the information referred to in art 10(1), first subparagraph, SFDR in accordance with art 23 of Directive (EU) 2016/97 (IDD).

  104. 104.

    Art 12(1) SFDR.

  105. 105.

    Art 10(1), second paragraph, SFDR, as further specified in arts 24–36 (art 8 products) and arts 37–49 (Article 9 products) SFDR Delegated Regulation.

  106. 106.

    See art 11(2) SFDR.

  107. 107.

    Art 9 Taxonomy Regulation.

  108. 108.

    Art 3 Taxonomy Regulation.

  109. 109.

    Ibid.

  110. 110.

    The ‘do no significant harm’ principle is an element in the definition of ‘sustainable investment’ set out in art 1(17) SFDR.

  111. 111.

    Art 3 Taxonomy Regulation; art 11(1), first paragraph, SFDR, read in conjunction with art 5 and 6 Taxonomy Regulation, further specified in arts 50–67 and Annex IV and V SFDR Delegated Regulation. Financial market participants may use the information in management reports in accordance with art 19 of Directive 2013/34/EU or the information in non-financial statements in accordance with art 19a of that Directive where appropriate (art 11(1), second paragraph, SFDR).

  112. 112.

    Art 3 Taxonomy Regulation; art 7 Taxonomy Regulation.

  113. 113.

    See art 11(2) SFDR: (a) for AIFMs, in the annual report referred to in art 22 of Directive 2011/61/EU; (b) for insurance undertakings, annually in writing in accordance with art 185(6) of Directive 2009/138/EC; (c) for IORPs, in the annual report referred to in art 29 of Directive (EU) 2016/2341; (d) for managers of qualifying venture capital funds, in the annual report referred to in art 12 of Regulation (EU) No 345/2013; (e) for managers of qualifying social entrepreneurship funds, in the annual report referred to in art 13 of Regulation (EU) No 346/2013; (f) for manufacturers of pension products, in writing in the annual report or in a report in accordance with national law; (g) for UCITS management companies, in the annual report referred to in art 69 of Directive 2009/65/EC; (h) for investment firms which provide portfolio management, in a periodic report as referred to in art 25(6) of Directive 2014/65/EU; (i) for credit institutions which provide portfolio management, in a periodic report as referred to in article 25(6) of Directive 2014/65/EU; and (j) for PEPP providers, in the PEPP Benefit Statement referred to in art 36 of Regulation (EU) 2019/1238.

  114. 114.

    Directive 2009/65/EC (UCITS Directive); Directive 2014/65/EU (MiFID II Directive); Directive (EU) 2016/97 (IDD Directive); Regulation (EU) No 1286/2014 (PRIIPs Regulation).

  115. 115.

    Art 13(1) SFDR. The ESAs may jointly develop, through the Joint Committee, draft implementing technical standards (ITSs) to determine the standard presentation of information on the promotion of environmental or social characteristics and sustainable investments (art 13(2), first paragraph, SFDR). Power is delegated to the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with art 15 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010 (art 13(2), second paragraph, SFDR).

  116. 116.

    Art 14(1) SFDR.

  117. 117.

    Art 14(2) SFDR.

  118. 118.

    See the letter of the ESAs dated 7 January 2021 to the European Commission, concerning several questions on the application of the SFDR (JC 2021 02); the answers to these questions given by the European Commission (Ref.Ares(2021)4556843–14/07/2021) (https://www.esma.europa.eu/sites/default/files/library/sfdr_ec_qa_1313978.pdf, accessed on 23 December 2023). On 9 September 2022 (JC 2022 47), the ESAs tabled additional questions on the application of the SFDR. See also the ESA document dated 17 November 2022 (JC 2022 62) containing ‘Questions and answers (Q&A) on the SFDR Delegated Regulation (Commission Delegated Regulation) (EU) 2022/1288)’. See also the ESA document dated 12 January 2024 (JC 2023 18) with ‘Consolidated questions and answers (Q&A) on the SFDR (Regulation (EU) 2019/2088) and the SFDR Delegated Regulation (Commission Delegated Regulation (EU) 2022/1288’. This consolidated version contains both the answers to questions by the European Commission and questions as answered by the ESAs.

  119. 119.

    See art 16(1) and 17(2) SFDR.

  120. 120.

    See art 17(1) SFDR.

  121. 121.

    See ss 2 and 3.

  122. 122.

    It should however be noted that the Markets in Crypto Assets Regulation (MiCAR) (Regulation (EU) 2023/1114) does subject issuers of crypto assets and crypto asset services providers (as defined there) to certain sustainability disclosures. See recital (7): ‘The consensus mechanisms used for the validation of transactions in crypto-assets might have principal adverse impacts on the climate and other environment-related adverse impacts. Such consensus mechanisms should therefore deploy more environmentally-friendly solutions and ensure that any principal adverse impact that they might have on the climate, and any other environment-related adverse impact, are adequately identified and disclosed by issuers of crypto-assets and crypto-asset service providers [italics added, DB]. When determining whether adverse impacts are principal, account should be taken of the principle of proportionality and the size and volume of the crypto-asset issued. […] ESMA […], in cooperation with […] EBA […], should therefore be mandated to develop draft regulatory technical standards to further specify the content, methodologies and presentation of information in relation to sustainability indicators with regard to adverse impacts on climate and other environment‐related adverse impacts, and to outline key energy indicators. The draft regulatory technical standards should also ensure coherence of disclosures by issuers of crypto-assets and by crypto-asset service providers. When develo** the draft regulatory technical standards, ESMA should take into account the various types of consensus mechanisms used for the validation of transactions in crypto-assets, their characteristics and the differences between them. ESMA should also take into account existing disclosure requirements, ensure complementarity and consistency, and avoid increasing the burden on companies’. See further arts 6(12), 19(11), 51(15), 66(6), 140(2)(y) MiCAR.

  123. 123.

    ‘TFEU’ stands for ‘Treaty on the Functioning of the European Union’.

  124. 124.

    See Sect. 14.9.

  125. 125.

    Art 14(2) SFDR.

  126. 126.

    COM(2017) 536 final (20 September 2017) (certain investment institutions and prospectuses); COM(2018) 113 final (8 March 2018) (crowdfunding service providers).

  127. 127.

    COM(2017) 343 final (29 June 2017). It is noted in this connection that, under the forthcoming MiCAR, if an asset-referenced token has been classified as significant in accordance with arts 39 or 40, its issuer shall carry out its activities under the supervision of the European Banking Authority (EBA), which shall exercise the powers of competent authorities conferred by arts 21 and 37–38 as regards issuers of such tokens (art 98(1)). Furthermore, if an e-money token has been classified as significant pursuant to arts 50 or 51, the EBA shall be responsible of their issuers’ compliance with the requirements laid down in art 52 (art 98(4)). Of course, we will need to wait and see whether this proposal will reach the finish line. The (near) final draft of MiCAR dated 5 October 2022 (2020/0265 (COD)) however still features these elements.

  128. 128.

    ESMA, Fast track peer review report on the application of the guidelines on the enforcement of financial information (ESMA/2014/1293) by BaFin and FREP in the context of Wirecard (3 November 2020) (ESMA42-111–5349).

  129. 129.

    See further https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/capital-markets-union/capital-markets-union-2020-action-plan/action-16-supervision_en (accessed on 23 December 2023).

  130. 130.

    See on the EU principle of effectiveness with regard to various aspects of EU financial law: D Busch, ‘The Private Law Effect of MiFID: Genil and Beyond’ (2017) 1 European Review of Contract Law 70; D Busch, ‘The Private Law Effect of the EU Market Abuse Regulation’ (2019) 3 Capital Markets Law Journal 296; D Busch, ‘The Influence of the EU Prospectus Rules on Private Law’ (2020) 4 Capital Markets Law Journal (all with further references, also to the relevant decisions from the Court of Justice of the European Union).

  131. 131.

    See B Bierens, ‘Hoofdstuk 6: De bancaire zorgplicht, klimaatverandering en het Europese ‘Actieplan: duurzame groei financieren’, in D Busch et al. (eds), Zorgplicht in de financiële Sector (Kluwer, Deventer 2020) § 2.4. See more generally on the phenomenon of supreme courts giving retroactive effect to regulatory law through the backdoor of broad private law concepts: D Busch, ‘The Future of the Special Duty of Care in the Dutch Financial Sector’ (2021) 3 European Business Law Review 473 (Sect. 14.7).

  132. 132.

    It is noted that the European Commission published on 30 March 2022 a proposal for a directive amending Directives 2005/29/EC (the Unfair Commercial Practices Directive, UCPD) and 2011/83/EU as regards empowering consumers for the green transition through better protection against unfair practices and better information (COM(2022) 143 final). The UCPD amendment proposal explicitly targets greenwashing.

  133. 133.

    Art. 14(1) SFDR.

  134. 134.

    See https://www.ftm.eu/green-investments (23 December 2023). See also https://www.esma.europa.eu/press-news/consultations/esas-call-evidence-greenwashing (accessed on 23 December 2023).

  135. 135.

    Cf Anu Bradford, The Brussels Effect—How the European Union Rules the World (OUP 2020).

  136. 136.

    See https://www.whitehouse.gov/briefing-room/statements-releases/2021/01/20/paris-climate-agreement/ (accessed 23 December 2023); https://www.theguardian.com/global-development/2022/nov/06/inflation-reduction-act-climate-crisis-congress (accessed on 23 December 2023). Cf also the Public Statement of John Coates (acting director division of corporation finance, US Securities and Exchange Commission, SEC) dated 11 March 2021 ‘ESG disclosure—kee** pace with developments affecting investors, public companies and the capital markets’ (https://www.sec.gov/news/public-statement/coates-esg-disclosure-kee**-pace-031121 (accessed on 23 December 2023).

  137. 137.

    See https://www.gov.uk/government/collections/financial-services-the-edinburgh-reforms (accessed on 23 December 2023).

Author information

Authors and Affiliations

  1. Financial Law Centre, Radboud University, Nijmegen, The Netherlands

    Danny Busch

Authors
  1. Danny Busch
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Danny Busch .

Editor information

Editors and Affiliations

  1. Financial Law Centre (FLC), Radboud University Nijmegen, Nijmegen, The Netherlands

    Danny Busch

  2. Department of Law, University of Genoa, Genoa, Italy

    Guido Ferrarini

  3. Financial Law Centre (FLC), Radboud University Nijmegen, Nijmegen, The Netherlands

    Seraina Grünewald

Rights and permissions

Reprints and permissions

Copyright information

© 2024 The Author(s), under exclusive license to Springer Nature Switzerland AG

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Busch, D. (2024). Sustainability Disclosure in the EU Financial Sector. In: Busch, D., Ferrarini, G., Grünewald, S. (eds) Sustainable Finance in Europe. EBI Studies in Banking and Capital Markets Law. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-53696-0_14

Download citation

  • DOI: https://doi.org/10.1007/978-3-031-53696-0_14

  • Published:

  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-031-53695-3

  • Online ISBN: 978-3-031-53696-0

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

Publish with us

Policies and ethics

Search

Navigation