European Union takes further steps towards a more sustainable economy

News

European Union takes further steps towards a more sustainable economy

12 December 2019

Regulatory News Alert

EBA issues action plan on sustainable finance

6 December 2019

On 6 December 2019, the European Banking Authority (EBA) issued it’s action plan on sustainable finance.

The objective of this action plan is to outline the EBA’s strategies on deliverables and activities related to environmental, social, and governance (ESG) factors and ESG risks.

The main points of attention are the following:

  • Explanation concerning the phased approach and associated time-lines for the reports, advices, guidelines, and technical standards mandated to the EBA
  • Provision of some clarity to relevant financial institutions on the EBA’s high-level policy direction and expectations about ESG risks under the form of key policy messages on the topic of sustainable finance
  • Emphasis of three areas where institutions are encouraged to consider taking steps before the EU legal framework is formally updated and the EBA regulatory mandates delivered: 
    • Strategy and risk management
    • Disclosure
    • Scenario analysis.
PDF - 152kb

Council adopts legislative reforms on sustainable finance

10 December 2019

On 25 November 2019, the European Parliament voted on the package to help introduce ESG compliance into the EU legal framework. Although not officially enforced yet, this text is a turning point in the close of the regulatory cycle at level 1.

The Council adopted two regulations on sustainable finance concerning:

  • The creation of a new category of benchmarks contributing to sustainable finance
  • Transparency obligations for sustainable investments.

Regulation of the European Parliament and of the Council amending Regulation (EU) 2016/1011 as regards EU Climate Transition Benchmarks, EU Paris-aligned benchmarks, and sustainability-related disclosures for benchmarks

To help investors chose investments that have a positive impact on the environment, the reform created new types of benchmarks aiming at giving greater information on an investment portfolio's carbon footprint:

  • EU climate transition benchmarks aim to lower the carbon footprint of a standard investment portfolio
  • EU Paris-aligned benchmarks select only components that contribute to attaining the 2°C reduction set out in the Paris Agreement
  • Benchmarks that consider a variety of ESG indicators.

On 9 December 2019, Regulation (EU) 2019/2089 of the European Parliament and of the Council of 27 November 2019 amending Regulation (EU) 2016/1011 was published in the Official Journal of the European Union (OJ).

The text sets out disclosure obligations on how financial companies integrate environmental and social factors in their investment decisions, to increase transparency, demonstrate commitment, and facilitate the investors’ decisions.

The Regulation advertises a harmonized EU approach to the integration of sustainability: all financial market participants and financial advisers will be required to disclose specific information regarding their approaches to the integration of sustainability risks and the consideration of sustainability adverse impacts, to prevent diverging standards across the Union.

The main mandatory disclosures concern:

  • The sustainability risk policy
  • The procedures that financial actors have in place to integrate environmental and social risks into their investment and advisory process
  • The extent to which those risks may have an impact on the profitability of the investment
  • Where investors claim to be pursuing an environmental and/or social investment strategy, information on how this strategy is implemented and the sustainability or climate impact of their products and portfolios.

On the same day, Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 was published in the Official Journal of the European Union (OJ).

As both these regulations aim at respecting the objectives of the Paris Agreement on climate change by making finance greener, procedures that financial actors have to pursue and integrate into their investment strategies should aim at: 

  • Reducing pollution
  • Preserving water resources
  • Enhancing a greater circular economy
  • Preventing deforestation
  • Demonstrating a significant decrease in GHG emissions.

 

 

European Commission presents the European Green Deal

12 December 2019

On 11 December 2019, the European Parliament presented the European Green Deal, a roadmap for making the European Union's economy sustainable.

The European Green Deal sets out the European Commission initiatives in ensuring the modernization and reduction of environmental impacts on all sectors of the economy. In the financial sector particularly, the Deal will aim at directing private capital towards more sustainable investments.

Hence, the EU provided this roadmap with actions to take to move toward a clean, circular economy, stop climate change, revert biodiversity loss, cut pollution, and help in making Europe the first climate-neutral continent by 2050.

Key novelties brought by the European Green Deal in the financial sector:

  • Strategy for green financing and a Sustainable Europe Investment Plan by autumn 2020
  • Proposal to turn parts of the European Investment Bank into Europe's climate bank
  • European Climate Law and Pact that sets a climate-neutrality target for 2050
  • Strategies and measures to mobilize sustainable public and private investments in greening the economy
  • Just Transition mechanism including a Just Transition fund, and a sustainable Europe investment plan
  • Review of the Non-Financial Reporting Directive
  • Circular economy action plan that promotes sustainable use of resources, especially in resource-intensive sectors with high environmental impact.

The private sector is encouraged to contribute to financing the green transition to direct financial and capital flows to green investments. The Commission will present a green financing strategy in the third quarter of 2020 that will focus on a number of actions to promote and mobilize private sustainable finance.

 

How can Deloitte help?

Deloitte’s advisory specialists and dedicated services will help you design and implement your business strategy in light of the future evolution of the regulatory framework and market trends.

With our Regulatory Watch Kaleidoscope service, Deloitte can also help you stay ahead of the regulatory curve to better manage and plan upcoming regulations.

Contacts

Subject matter specialists

Pascal Martino
Partner – Banking Leader
Tel : +352 45145 2119
pamartino@deloitte.lu

Julie Castiaux
Senior Manager – Sustainability Expert
Tel : +352 45145 3648
jucastiaux@deloitte.lu

Aurore Delury
Senior Manager – Strategy Regulatory 
& Corporate Finance
Tel : +352 45145 3897
adelury@deloitte.lu

Elodie Vandewoestyne
Manager – Strategy Regulatory 
& Corporate Finance
Tel : +352 45145 2627
evandewoestyne@deloitte.lu

 

Regulatory Watch Kaleidoscope service

Simon Ramos
Partner – IM Advisory & Consulting 
Leader
Regulatory Watch services Co-Leader
Tel : +352 45145 2702
siramos@deloitte.lu

Jean-Philippe Peters
Partner – Risk Advisory
Regulatory Watch services Co-Leader
Tel : +352 45145 2276
jppeters@deloitte.lu

Benoit Sauvage
Director – Regulatory Watch services coordinator
Tel : +352 45145 4220
bsauvage@deloitte.lu

Marijana Vuksic
Manager – Strategy, Regulatory & Corporate Finance
Tel : +352 45145 2311
mvuksic@deloitte.lu

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