ESG regulatory news
April 24, 2020

ESG regulatory news

Elizabeth Gillam. Head of EU Government Relations & Public Policy

Managing ESG risks, in particular climate change, is becoming a financial regulatory topic around the world. In Europe, the EU is going further by incentivizing investors to invest sustainably.

  • Regulatory expectations are focusing on ESG integration: Global regulatory standard setters have outlined minimum requirements including governance and strategy, integration into investment and risk management, and disclosure.
  • Efforts to align portfolios with the Paris Agreement: The European Union reached a landmark deal on the creation of a so-called taxonomy for sustainable investments. This will allow investors to assess – based on scientific criteria – the extent to which the companies they invest in are aligned with the Paris Agreement.
  • Reporting on ESG issues is increasingly a focus area: On a European level, financial market participants will be required to disclose their approach to ESG integration and enhance their disclosures for sustainable products by 10 March 2021. At a global level, the IAIS has signalled that prudential regulators are considering the introduction of mandatory reporting by insurers according to the TCFD framework.
  • Developing scenario analysis is a priority for prudential regulators: The Bank of England announced it will conduct the first in-depth climate stress test for UK banks and insurers. The European Insurance and Occupational Pensions Authority (EIOPA) has also started including ESG issues in their stress tests for insurers and pension schemes. The Network for Greening the Financial System (NGFS) is expected to publish its work on scenario analysis in April 2020.
  • EU development of an ecolabel for green funds and the involvement of national regulators: The aim is to set minimum standards for funds marketed as sustainable. We expect this topic to become increasingly important as the EU moves towards implementing a new regime for sustainable product disclosures, while introducing changes to distribution rules so that a client’s ESG preferences must be given consideration.

Explore these initiatives and their impact in more detail in the ESG Regulatory News.

Investment risks

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Important information

  • Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.

    EMEA3093/2020