ESG
CORPORATE SUSTAINABILITY DUE DILIGENCE DIRECTIVE (CSDDD)
One of the key discussion points at political level in the context of the latest trilogues on the CSDDD is whether the financial sector will be excluded for the time being, subject to a review period. This particular point was not discussed the latest trilogue meeting. The next meeting is scheduled for 13 December 2023, making it less likely that the CSDDD will be finalised at political level by the end of 2023.
CORPORATE SUSTAINABILITY REPORTING DIRECTIVE (CSRD)
In the context of the European Commission’s Work Programme for 2024, the European Commission plans to postpone deadlines for the adoption of certain European Sustainability Reporting Standards (ESRS). This is linked to its initiatives to reduce the reporting burden on EU corporates by 25%.
The Commission’s consultation set out more detail its plan is to postpone the adoption deadline for ESRS for certain sectors and for certain third country undertakings. It closes for feedback on 19 December 2023.
The Accounting Directive as amended by the CSRD requires certain entities to include, in a dedicated section of their management report, information necessary to understand the company’s impacts on sustainability matters, and the information necessary to understand how sustainability matters affect the company’s development, performance and position. This information must be reported in accordance with ESRS to be adopted by the Commission by means of delegated acts. The Commission adopted sector-agnostic ESRS in 31 July 2023. Sector-specific ESRS are to be adopted by 30 June 2024. The Commission’s proposal is to delay, by 2 years, the 2024 adoption date for the sector-specific ESRS. According to the Commission, this will allow in-scope companies to focus on the implementation of the sector-agnostic ESRS adopted in July 2023. This proposal will also postpone, by 2 years, the deadline for certain non-EU companies with business in the EU to adopt the ESRS to be used by them.
GREEN LOANS
The Loan Market Association (LMA) indicated at its Sustainable Finance Conference on 9 November 2023 that it plans to publish a new guide to green loan frameworks in December 2023.
SUSTAINABLE FINANCE DISCLOSURES REGULATION (SFDR)
The European Commission’s targeted consultation and public consultation on the implementation of the SFDR close on 15 December 2023.
The public consultation seeks feedback on SFDR implementation to date, potential shortcomings, the interplay with other sustainable finance legislation and possible options for improvement.
The targeted consultation covers the above questions, and also looks for feedback on potential changes to the disclosure requirements under the SFDR, and the possible establishment of a categorisation system for financial products. At 3.2 of the targeted consultation, the Commission notes that the “SFDR was designed as a disclosure regime, but is being used as a labelling system, suggesting that there might be a demand for establishing sustainability product categories.”
For more detail on the consultations, read our insights here: Sustainable Finance Update: Commission consults on SFDR.
TAXONOMY REGULATION
The Amending EU Taxonomy Climate Delegated Act and the New EU Taxonomy Environmental Delegated Act both published in the Official Journal on 21 November 2023, will enter into force on 11 December 2023. With very limited exceptions, they will apply from 1 January 2024.
The Amending EU Taxonomy Climate Delegated Act amends the original Climate Delegated Act, which set out technical screening criteria (TSC) for economic activities which can make a substantial contribution to climate change mitigation and climate change adaptation. The latest amendments add TSC for additional activities. For climate change mitigation, these include some manufacturing activities for components for low-carbon transport and electrical equipment and some transitional activities in waterborne transport and aviation where zero-carbon solutions aren’t yet sufficiently advanced. For climate change adaptation, these include activities enabling adaptation to the unavoidable effects of climate change (e.g. desalination and services for preventing and responding to climate-related disasters / emergencies). A small number of technical changes were also made to some existing TSC to make them clearer and more usable.
The new EU Taxonomy Environmental Delegated Act sets out TSC for the four remaining environmental objectives under the EU Taxonomy Regulation:
- Sustainable use and protection of water and marine resources.
- Transition to a circular economy.
- Pollution prevention and control.
- Protection and restoration of biodiversity and ecosystems – reflecting the growing importance being attached to the impact of climate change on biodiversity.
This Delegated Act also sets out criteria for determining whether these economic activities cause significant harm to any of the other environmental objectives, and amends the Taxonomy Disclosures Delegated Act to ensure consistency of disclosure requirements, and to correct some technical errors.
The Commission separately noted that further work will be needed on bringing other sectors and activities (e.g. agriculture, forestry and fishing) into scope.
Read our insights for more information: EU Taxonomy: New Environmental Delegated Act; Changes to Climate Delegated Act