In May 2018, the Commission adopted a proposal for a Regulation on disclosures relating to sustainable investments and sustainability risks (the Disclosures Regulation) as part of its Action Plan.
What does it propose?
The Disclosures Regulation would impose transparency and disclosure requirements on
- financial market participants, and
- insurance intermediaries providing insurance advice on insurance-based investment products (IBIPs) and financial advisors
concerning the integration of sustainability risks in the investment decision making process and advisory processes.
The proposal addresses the concern that disclosures in the above sectors remain unsystematic and inconsistent, making it more difficult for end-investors to make informed investment choices.
The Disclosures Regulation would require firms to:
- publish written policies on the integration of sustainability risks in their investment decision making process
- make pre-contractual disclosures on how they incorporate sustainability risks in their businesses
- comply with pre-contractual transparency rules on sustainable investments
- publish a description of the sustainable investments target and information on the methodologies used to assess, evaluate and monitor the effectiveness of investments
- describe in periodical reports the specification of the impacts of sustainable investments by means of relevant sustainability indicators, and
- ensure that all the information published on their websites is kept up-to-date, including a clear explanation of any amendments to the published information.
The Commission also highlights that the Disclosures Regulation is not intended to regulate market access for these financial market participants and financial advisors but, rather, to govern the way their activities are carried out.
Where does it stand?
On adoption, the proposal (along with that for the Framework Regulation – see above) was submitted to the EP and to the Council for these to develop their positions ahead of trilogue negotiations.
ECON’s draft report on the Disclosures Regulation was published in August 2018. Amendments to the report were tabled in September 2018. ECON subsequently voted on which of these amendments were included into a final report. The final report was then tabled for plenary and adopted by the EP in November 2018.
ECON and ENVI subsequently voted on which of these amendments were included into a Final Report. After further amendments, the EP approved the Final Report at a plenary session in March 2019.
The Council adopted a General Approach on the Disclosures Regulation in December 2018.
After trilogue negotiations with the Commission, the Council and the EP reached an agreement on 07 March 2019.
The agreed text will be adopted by the EP and endorsed by the Council before being published in the Official Journal.
To see a more detailed tracker of the Disclosures Regulation please see here.
To see key industry comment on the Disclosures Regulation please see here.