Financial Services Trends to Watch – Q4 – UN and EU initiatives

Financial Services Trends to Watch – Q4 – UN and EU initiatives

 

As part of our sector-focused series, we have spoken with our in-house PSLs to outline the key legal trends to watch in Financial Services as 2019 draws to a close.

This article focuses on sustainable finance, LIBOR and the new prudential regime.

 

1.  A growing focus on sustainable finance

 

On 22 September 2019, 13 years after the launch of the United Nations (UN)-supported Principles for Responsible Investment (PRI), the UN Environment Programme Finance Initiative’s (UNEP FI) Principles for Responsible Banking (PRB) were launched.  

The PRB aim to strategically align banks with the UN Sustainable Development Goals (SDGs) and the UN Paris Agreement on Climate Change and - like the PRI - contain mandatory reporting requirements for signatories. 

Both the PRI and the PRB have a significant number of signatories globally and it is likely that further banks, asset owners, investment managers and service providers will sign up to these principles.

In addition to the global, voluntary PRB and PRI - and a wide range of industry best practice guidance for different asset classes - there are proposals for EU regulations (and amendments to delegated acts under the recast Markets in Financial Instruments Directive 2014/65/EU (MiFID II) and the Insurance Distribution Directive (EU) 2016/97) on:

 

  • Taxonomy  -  a unified classification system on what can be considered an environmentally sustainable economic activity, which (amongst other things) is intended to reduce the risk for ‘greenwashing,’ ie where the ‘green’ label is potentially mis-used in order to tap into increased investor demand for sustainable and green investments

     

  • ESG integration - disclosure obligations on how pension schemes, asset managers, institutional investors, insurance distributors and investment advisors integrate environment, social and governance (ESG) factors into their risk management processes, investment decisions and advisory processes, including suitability tests

     

  • Benchmarks - new categories of benchmarks, comprising low-carbon and positive carbon impact benchmarks, intended to provide investors with better information about the ‘carbon footprint’ of their investments

 

 

Further reading:

 

For further information about these EU regulatory developments, see the European Commission’s webpage on green finance and frequently asked questions and our Sustainable finance timeline.

 

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About the author:
Amy is a content writer and marketing manager at LexisNexis. She previously worked as an independent writer and researcher, for clients such as, Unilever, Kantar TNS, The Soil Association, MasterCard and Lufthansa Airlines. She has written for national publications, including City A.M. and Financial IT. Amy now writes and plans editorial content for the LexisNexis blogs, campaigns and industry magazine features. She has a Bachelor's Degree in Italian and French from the University of Warwick.