Article

The European Commission’s Sustainable Financial Action Plan – a summary

28 May 2021
Elizabeth Gillam
Elizabeth Gillam
Head of EU Government Relations and Public Policy
Maria Lombardo
Maria Lombardo
European Head of ESG Client Strategies
Graham Hook
Graham Hook
Head of UK Government Relations and Public Policy
ESG regulation

The Sustainable Finance Disclosures Regulation (SFDR), which went live on 10 March 2021, is by far the most immediate priority when it comes to the new EU sustainable finance regulations but it is just the tip of the iceberg when it comes to the EU’s ambitions in this space.

Who will be impacted by the EU regulatory changes
Figure 1. Who will be impacted by the EU regulatory changes

The European Commission’s Sustainable Financial Action Plan, launched in 2018, sets out 10 areas of action grouped under three themes that will lead to regulatory change across the financial services industry value chain:

  • re-orient investments towards more sustainable technologies and businesses
  • finance growth in a sustainable manner over the long-term
  • contribute to the creation of a low-carbon, climate resilient and circular economy.

In our view, it is only by looking across the broad agenda and seeing how the different pieces of the jigsaw fit together that firms can take a strategic approach to the shift towards sustainability. 

Timeline:

23 December 2020 
Implementation of Climate Benchmarks and ESG Benchmark Disclosure Regulation

10 March 2021 
Implementation of Sustainable Finance Disclosures Regulation (based on Level 1 Regulation; except principle adverse impact for firms with more than 500 employees which applies from 30 June 2021 (Article 4(3) &(4) and product-level principal adverse impact disclosures (Article 7) which applies from 30 December 2022)

21 April 2021
Commission to adopt final rules on integration sustainability in for funds, insurance firms and financial advisers and integration sustainability preferences into target market and product governance requirements for product manufacturers and distributors (UCITS, AIFMD, Solvency 2, IDD and MiFID 2) (expected). A proposal for a Corporate Sustainability Reporting Directive was published at the same time

Q2 2021 
Adoption of Sustainable Finance Strategy and accompanying legislative proposals

June 2021 
EBA report on integrating sustainability for banks and investments firms

December 2021 
Implementation of Taxonomy disclosures for climate change

January 2022 
Implementation of Sustainable Finance Disclosures Regulation Regulatory Technical Standards

December 2022 
Implementation of Taxonomy disclosures for the remaining environmental objectives

To help navigate the increasingly complex regulatory landscape, moving beyond the alphabet soup of regulatory initiatives towards a thematic view across the following four pillars can help firms (such as asset managers, insurance companies, pensions funds and financial advisers) to take a consistent view across the board and understand the interconnectivity between the disclosures required under the SFDR and upcoming regulatory changes that will embed sustainability in the way firms operate: 

Click on the above pieces to explore the topics in greater detail, or go back to the hub.

The above article is an excerpt from our recent whitepaper, which you can download in full here: Shifting Gears: Preparing for the new sustainable finance regulations in Europe.

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