On 8 April, the European Commission (“EC“) published the following three draft delegated regulations:
Sustainable finance – minimum standards for climate benchmarks
This initiative sets out minimum standards to help benchmark administrators design the “EU climate transition” and “EU Paris-aligned” benchmarks. These labels are designed to help investors looking to adopt a low-carbon investment strategy.
These low-carbon benchmarks aim to:
- improve transparency and comparability
- reallocate capital towards climate-friendly investments
- prevent administrators from making misleading low-carbon claims (“greenwashing“).
Sustainable finance – environmental, social and governance criteria (benchmarks)
This initiative requires companies that publish financial benchmarks to explain how environmental, social and governance criteria are reflected for each benchmark/family of benchmarks, and also provides rules on:
- the extent to which benchmark statements comply with the Paris Climate Agreement
- the standard format for references to the 3 criteria.
Financial benchmarking – building in environmental, social & governance criteria
This initiative requires companies that publish financial benchmarks to provide information on how they build environmental, social and governance factors into their calculations.
These criteria help traders and investors assess how a company’s sustainability and ethical practices impact its financial performance and operations. They are designed to make it easier to compare assets and make well-informed investment choices.
Each of the draft acts are open for feedback until 6 May 2020. The EC will take feedback received into account for finalising the initiatives.