ESG
"From 1 January 2023, certain Taxonomy Regulation related disclosures apply to those funds under Articles 8 and 9 SFDR that make sustainable investments with environmental objectives in accordance with the EU taxonomy."
ESG
Mondaq’s Environmental, Social and Governance (ESG) Regulation Comparative Guide
Need to know where we are with ESG? The Comparative Guides provide an overview of some of the key points of law and practice and allow readers to compare regulatory environments and laws across multiple jurisdictions. Lawyers from across the firm have contributed the comparative guide for Ireland.
Read the full Ireland guide here.
Sustainability Reporting
EU listed companies who fall within scope of the Non-Financial Reporting Directive enter their second year of reporting under Article 8 of the Taxonomy Regulation in relation to environmentally sustainable activities for climate change adaptation and mitigation, which from 1 January 2023 also include specific nuclear and gas activities under the Complementary Delegated Act. From 1 January 2023, non-financial entities are required to report on taxonomy eligibility and alignment and will commence reporting on their KPIs. A second set of technical screening criteria for the remaining environmental objectives under the Taxonomy regulation (sustainable use of water & marine protection, circular economy transition, pollution prevention & control and protection and respiration of biodiversity & ecosystems) was due to be adopted via delegated act to be applicable from 1 January 2023, however this has been delayed.
The Corporate Sustainability Reporting Directive (CSRD) was published in the Official Journal of the EU on 16 December 2022 and EU member states are required to transpose its obligations into national law by 6 July 2024. The CSRD will be phased in, with the obligations applying to the first group of reporting companies in respect of financial years commencing from 1 January 2024 (reporting 2025). The European Commission is due to adopt the first set of mandatory reporting standards under the CSRD by 30 June 2023, to apply from 1 January 2024.
The EU Council and European Parliament are due to commence negotiations on the proposal for a directive on Corporate Sustainability Due Diligence in 2023.
SFDR Compliance for Funds
The Sustainable Finance Disclosures Regulation (SFDR) Level 1 requirements applied from 10 March 2021 and financial market participants, which include AIFMs, UCITS management companies and self-managed investment companies (Fund Management Companies), were required to comply with a number of high-level principles-based disclosure requirements by that date. The SFDR Level 1 requirements were supplemented by more detailed Level 2 requirements (SFDR RTS) and these requirements entered into force from 1 January 2023. From that date, Fund Management Companies are required to comply with detailed pre-contractual and annual reporting disclosures and must make these disclosures in the form of the mandatory templates, which are set out in the annexes to the SFDR RTS for relevant products.
In addition, from 1 January 2023, certain Taxonomy Regulation related disclosures apply to those funds under Articles 8 and 9 SFDR that make sustainable investments with environmental objectives in accordance with the EU taxonomy.
Accordingly, most Irish Fund Management Companies will have updated their prospectuses ahead of the 1 January 2023 deadline and all funds publishing their annual reports on or after 1 January 2023 will be required to comply with the prescribed disclosure requirements. Q1 2023 will see further updates required as the amended Delegated Regulation, currently being scrutinised by the European Parliament and the Council of the EU, will require additional disclosure by way of a graph reflecting the extent to which a portfolio is exposed to the gas and nuclear-related activities that comply with the EU taxonomy, as set out in the Complementary Climate Delegated Act. Responses to the further queries submitted by the European Supervisory Authorities to the European Commission on 9 September 2022, relating to the interpretation of SFDR, are also expected in Q1 2023.
Climate Governance
2023 takes us to the mid-point of our first five year carbon budget, the statutory intent of which is to get to the end of 2030 with greenhouse gases reduced by 51% compared to 2018. We also have a new Climate Action Plan 2023, which includes targets for 2025 and 2030, some of which reflect an increase in ambition since the last Climate Action Plan. Actions to be executed in 2023 are listed and include some of the eagerly awaited actions not yet closed off under the ambitious 2021 Plan.
Our overview of the Climate Action Plan 2023 is here.
“From 1 January 2023, non-financial entities will be required to report on taxonomy eligibility and alignment while financial entities will continue to report on Taxonomy eligibility until 1 January 2024."