The ESMA recently published a series of papers aimed at clarifying its sustainable finance laws. The documents center on three EU laws, the SFDR, the EU Taxonomy, and the Benchmarks Regulation. While these new documents are not binding guidance, they are designed to help clarify the central concepts and legal framework surrounding sustainable finance. The three documents include:
- Concepts of Sustainable Investments and Environmentally Sustainable Activities in the EU Sustainable Finance Framework
- ‘Do No Significant Harm’ Definitions and Criteria Across the EU Sustainable Finance Framework
- Concept of Estimates Across the EU Sustainable Finance Framework
The ESMA states that:
“The notes aim at setting out factual information regarding these concepts and providing helpful aide to stakeholders to navigate and better understand the Sustainable Finance legislative framework. These documents are purely descriptive. They are not intended to replace relevant legal texts nor to provide guidance on the application of relevant provisions.”
The EU has been trying to clean up sustainable finance. These clarifying notes come after a consultation paper and new guidance was issued for the SFDR back in April 2023. So far, regulators have found it difficult to implement a system that is easy for investors and financial institutions to understand while also eliminating the risk of greenwashing in sustainable finance.
It is interesting that these documents are being published now because major changes to the SFDR are still in limbo. After the consultation paper was published in April, the Commission was expected to review the changes and move forward with revisions to the SFDR by Q4 2023. We may still see those changes before the year’s end, but for now, these documents can help make sense of the existing regulations.
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