Posted inEurope

EC launches consultation on sustainable benchmarks

The European Commission has published three consultations on draft delegated regulations for environmental, social and governance (ESG) benchmarks.

The delegated acts relate to previous amendments of the EU Benchmark Regulation (BMR).

At the end of 2019, the European Union adopted the regulation on EU Climate Transition Benchmarks, EU Paris-aligned Benchmarks and sustainability-related disclosures in the financial sector.

The climate benchmark regulation is one of three legislative initiatives which form the EU’s Sustainable Finance Action Plan and aim to increase sustainable finance flows.

Ahead of the finalisation of the regulation, benchmark providers, such as MSCI, S&P and Solactive, have already released indices and concepts* despite further possible amendments.

Content

The three consultations focus on:

  • Draft regulation on the minimum standards for EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks. The regulation sets out the minimum standards the climate benchmarks should meet to be labelled as such, and lays down the transparency requirements on the methodology for both benchmarks.
  • Draft regulation on the minimum explanation on applied ESG factors in each benchmark provided and published. The regulation sets out which explanation needs to be included in the benchmark statement regarding how ESG factors are reflected in each benchmark or, where applicable, family of benchmarks.
  • Draft regulation on the minimum explanation regarding how ESG factors are reflected in the benchmark methodology. The regulation lays down the explanation needed regarding how the key elements of the benchmark methodology reflect ESG factors, with the exception of interest rate and foreign exchange benchmarks, as well as the standard format to be used.

The consultations are open for comments until 6 May 2020.

The Commission also announced a Renewed Sustainable Finance Strategy last week.

 

*The article has been amended and the word “concepts” has been added afterwards.

Elena Johansson

Senior Reporter

Part of the Bonhill Group.