Overview of the EU Disclosure Regulation

Overview of the EU Disclosure Regulation

Financial Services analysis: Lora Froud, partner, and Tiffany Cox, solicitor, at Macfarlanes discuss the scope, impact, new concepts and next steps of the EU Disclosure Regulation.

 

Original news

SMSG calls for iterative, aligned approach to ESG disclosures

The Securities and Markets Stakeholder Group (SMSG) has issued advice to the European Supervisory Authorities on their joint consultation paper on draft regulatory technical standards (RTS) with regard to environmental, social and corporate governance (ESG) disclosures pursuant to the Sustainable Finance Disclosure Regulation (EU) 2019/2088 (SFDR). The SMSG calls for more alignment between the SFDR and other legislation, in particular the Non-Financial Reporting Directive and the Taxonomy Regulation. The Council of the EU has adopted the Taxonomy Regulation at first reading by written procedure. It now needs to be adopted by the European Parliament at second reading, before it can be published in the Official Journal of the EU and enter into force. The Taxonomy Regulation sets out an EU-wide classification system (taxonomy) for ‘environmentally sustainable economic activities’. It is intended to enable the EU to become climate neutral by 2050 and achieve the Paris Agreement’s 2030 targets, including a 40% cut in greenhouse gas emissions. It also aims to prevent illegitimate use of the ‘green’ or ‘sustainable’ label (‘green washing’).

 

What is it?

SFDR on sustainability-related disclosures in the financial services sector (known as the Disclosure Regulation), is part of a broader legislative package under the European Commission’s Sustainable Finance Action Plan.

 

Impact on the industry

It requires firms to make strategic business and policy decisions regarding their approach to ESG which must be disclosed on the firm’s website and in pre-contractual and periodic disclosures. Although the focus of the Disclosure Regulation is the provision of information to investors, clients

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