Taskforce on Nature-related Financial Disclosures (TNFD)’s Post

TNFD for Financial Institutions 💡 Additional guidance is here, built with the feedback from the open consultation. #SustainableFinance #Nature

Regulators in the EU Suggest New Disclosures for Financial Products Regarding Social and Climate Goals European Supervisory Authorities Complete Review of Sustainable Finance The top European supervisory authorities, known as the European Supervisory Authorities (ESAs), have completed their review and revision of the Regulatory Technical Standards (RTS) for the Sustainable Finance Disclosure Regulation (SFDR). They have published their Final Report, proposing new mandatory disclosure rules for financial products related to social factors such as exposure to the tobacco industry and insufficient wages. The report also proposes new disclosures for the GHG emissions reduction targets of financial products. The EU's SFDR is part of the EU's Action Plan to Finance Sustainable Development. The regulation aims to establish harmonized rules for financial market participants, including investors and advisors, on the transparency of integrating sustainability risks and considering negative impacts on sustainability in their processes, as well as providing sustainability-related information for financial products. The publication of this Final Report follows a request from the European Commission in April 2022 for the ESAs to review the Regulatory Technical Standards (RTS) set out in the SFDR regulation, including the Principal Adverse Impacts (PAI) indicators and financial product disclosures. The ESAs were initially given a 12-month deadline to complete the review, but in November 2022, they informed the Commission of a 6-month delay. During the review, the ESAs proposed a number of significant changes, including expanding and adjusting the list of PAIs - details of the negative impacts of investment decisions on sustainability factors. This list now includes a range of social indicators and is considered mandatory. These indicators include "exposure to companies operating in tobacco cultivation and production" (an update to a previous tobacco-related indicator), "employees earning insufficient wages", and revised indicators for investments in companies that have violated the OECD Guidelines for Multinational Enterprises, as well as for the gender pay gap between female and male workers. The regulators have also developed new draft RTS, including new disclosures for financial products related to GHG emissions reduction targets. These products include those with emissions reduction targets. The requirements for these products include disclosure in pre-contractual documentation of the type of outcome the product commits to achieving and of the alignment of the target with the objective of limiting global warming to 1.5 degrees Celsius. In addition, there must be periodic reporting disclosures to provide progress and explain how the investment strategy has contributed to progress, and there must be more detailed disclosures on the website.

After a thorough evaluation, the European Supervisory Authorities (ESAs) have significantly enhanced the Sustainable Finance Disclosure Regulation (SFDR). Key proposals include new categorization systems, complementary indicator frameworks, and a focus on defining sustainable investments. Scope expansion, simplification of documentation, and transparency of Principal Adverse Impact (PAI) are also in the spotlight. The ESAs emphasize consumer testing and robust evidence to ensure the effectiveness of these policy modifications. Stay updated on the latest developments in sustainable finance regulation: [Link to the article here] #ESAs #SFDR #SustainableFinance #Regulation #EU #Finance #ESG #Investments #Transparency #Compliance #ᴍɪᴋᴇᴅᴜɴᴄᴀɴ #ᴍᴀᴋᴇitʜᴀᴩᴩᴇɴ #LBFalumni #SkyHighTower🚀

Here’s a note from Gibson Dunn pulled from this memo: "On 14 September 2023, the European Commission published “targeted“ and “public“ consultations on Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (the “SFDR”). While the European Commission states that the views reflected in the consultation papers do not indicate its final position on the future shape of the SFDR, the tenor of both consultations provide useful insights into the potential implications of future reform for those financial market participants (“FMPs”) (which includes alternative investment fund managers (“AIFMs”)) who fall within the scope of the current regime. The scope and detail of the questions asked in the consultation papers speak to Brussels’ serious concerns about the implementation of the SFDR since its introduction in March 2021, as well as its increasing contemplation of an overhaul of the existing framework. While any proposed changes would not come into force for several years, AIFMs and other FMPs should expect continuing legal uncertainty as it relates to future obligations under the SFDR. The European Commission has set a deadline of 15 December 2023 for feedback on four distinct areas addressed in the consultations: (a) the current requirements of the SFDR; (b) its interaction with other sustainable finance legislation; (c) potential changes to disclosure requirements for financial market participants; and (d) the potential establishment of a categorisation system for financial products. The Commission aims to publish a finalised report on the SFDR in Q2 2024." #esg #climate https://lnkd.in/gQXsSBpQ

Here are some key insights from the morning workshop (see linked post below), during which regulators and financial market participants shared their views about SFDR and its future: - There was acknowledgment that SFDR has been helpful in opening up the debate. - There was broad support for product labels. - These labels could potentially build upon current Articles 8 and 9, but with minimum criteria set for each. - The proposed measures should be simple, holistic, objective, and aligned with other sustainability regulations. - Some concepts of SFDR, such as the definition of sustainable investment under Article 2(17), need further clarification. - SFDR currently does not prescribe any disclosures for non-sustainable investments, putting sustainable investments at a cost disadvantage. - The new framework should be able to distinguish between disclosures for retail and professional investors. - The cost of reporting is a factor, but sustainability disclosures are also required. - While Article 9 funds are easy to identify, Article 6 and Article 8 funds often have very similar investments. - There should be an ability to differentiate between exclusion criteria that are part of normal business operations and those that promote ESG. - Certain national regulators in the EU are currently introducing their own labels; it raises questions about how these labels will interact with EU labels in the future. - The Taxonomy is not yet ready for its intended purpose and needs more work; full SFDR alignment with the Taxonomy could be a challenge. - Product names should accurately reflect their offerings. - Transitional investments should be appropriately addressed in the updated framework. Next steps: A couple of technical workshops are planned in the coming days. Consultations will close on December 15, after which the Commission will study the responses. However, it will be up to the next Commission to decide on the steps they plan to take going forward. If you have any comments or questions about SFDR, please feel free to contact us at IQ-EQ: Andrew Shrimpton Lyons O'Keeffe Rebecca Hall Michael Strug Vasantha Rajasooriyar, CFA George Wood Xi YU Asimina Bibe Harry Barnes Suraj Ruparell Lynne M. Carreiro #sfdr #sustainability #reporting #funds

ESAs propose improvements to the sustainable finance disclosure regulation -SFDR update! - simple and clear categories for financial products - reduce #greenwashing The three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) published a joint Opinion on the assessment of the Sustainable Finance Disclosure Regulation (#SFDR). The ESAs call for a coherent sustainable finance framework that caters for both the green transition (#ESG) and enhanced consumer protection, taking into account the lessons learned from the functioning of the SFDR. The ESAs focus on ways to introduce simple and clear categories for financial products. The simplifications consist of two voluntary product categories, “sustainable” and “transition”, that financial market participants should use to ensure consumers understand the purpose of the products. The rules for the categories should have a clear objective and criteria to reduce greenwashing risks. The ESAs recommend that the European Commission consider the introduction of a sustainability indicator that would grade financial products such as investment funds, life insurance and pension products. In addition, the Opinion also covers the following areas: - appropriate disclosures for products outside the two categories to reduce #greenwashing, - improvements to the definition of sustainable investments, - simplification to the way disclosures are presented to investors, - other technical suggestions including on which products should fall under the scope of SFDR and on how to improve disclosures regarding the negative impact of investments on people and the environment, and - the need for consumer testing before putting forward any policy proposals to review the SFDR, such as to introduce a categorisation system and/or an indicator. Further information please see link below. Best regards, Hartmut Renz https://lnkd.in/ekGjrgXr

"The Sustainable Finance Disclosure Regulation (SFDR) is a key part of the EU’s efforts to attract the private investment Europe needs to finance the transition to a green and sustainable economy. Designed to bring transparency, the SFDR was one of the first pillars of the EU’s sustainable finance framework to be put in place. The regulation is, however, not entirely working as intended. That is why the European Commission has launched a comprehensive assessment of the SFDR. The aim is to ensure legal certainty and that the SFDR plays its part in tackling greenwashing. "As part of this assessment, and to accompany a targeted consultation and a public consultation launched on 14 September, the Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) is organising this high-level online workshop. The event will be opened by Commissioner Mairead McGuinness. The objective of the workshop is to discuss current challenges of the SFDR and possible ways forward for sustainability disclosures in the EU. Questions to be tackled include how to ensure better coherence between the SFDR and other parts of the EU’s sustainable finance framework, how to make disclosures more effective as well as the potential introduction of product categories." Event is on Tuesday 10th October, 9:30am CEST (8:30am UK time), and can be watched using the below link: https://lnkd.in/eTJrdJDF If you have any comments or questions about SFDR, please feel free to contact us at IQ-EQ: Andrew Shrimpton Lyons O'Keeffe Rebecca Hall Michael Strug Vasantha Rajasooriyar, CFA George Wood Xi YU Asimina Bibe Harry Barnes Suraj Ruparell Lynne M. Carreiro #sfdr #sustainability #reporting #funds

The three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) today published a joint Opinion on the assessment of the Sustainable Finance Disclosure Regulation (SFDR). 📌"The ESAs focus on ways to introduce simple and clear categories for financial products. The simplifications consist of two voluntary product categories, “sustainable” and “transition”, that financial market participants should use to ensure consumers understand the purpose of the products. The rules for the categories should have a clear objective and criteria to reduce greenwashing risks. " 📌The ESAs recommend that the European Commission consider the introduction of a sustainability indicator that would grade financial products such as investment funds, life insurance and pension products. 📌In addition, the Opinion also covers the following areas: => appropriate disclosures for products outside the two categories to reduce greenwashing, => improvements to the definition of sustainable investments, => simplification to the way disclosures are presented to investors, => other technical suggestions including on which products should fall under the scope of SFDR and on how to improve disclosures regarding the negative impact of investments on people and the environment, and => the need for consumer testing before putting forward any policy proposals to review the SFDR, such as to introduce a categorisation system and/or an indicator." European Banking Authority (EBA) European Securities and Markets Authority (ESMA) European Insurance and Occupational Pensions Authority (EIOPA) #sfdr #funds #responsibleinvesting #sustainability #transition #advisors #assetmanagement https://lnkd.in/dz-kahUP

🌍 Are We Ready for the TNFD Framework? Insights and Implications for Australian Businesses? The UK Government has been encouraged by the Aldersgate Group to develop a roadmap for mandatory disclosures based on the Taskforce on Nature-related Financial Disclosures (TNFD). This call follows the Aldersgate Group's analysis highlighting critical challenges businesses face in adopting the TNFD framework, emphasizing the need for clear guidelines and standards in nature-related financial disclosures. 🔑 Key Challenges Identified by Aldersgate Group: - Understanding Nature-Related Risks: A disparity exists in board-level understanding of nature-related risks, with only 32% of financial institutions overseeing such issues, compared to 91% for climate-related matters. - Organisational Capacity: Many organizations, even those with specialized ESG teams, find it challenging to align with the TNFD framework, indicating a significant gap in expertise. - Data Measurement and Disclosure: The lack of a standard metric for assessing nature-related impacts leads to hesitation in disclosing data, which may be perceived as incomplete. 📈 Businesses Stepping Up: Significantly, over 300 businesses have already signalled their intention to formally adopt the TNFD's recommendations. This collective move demonstrates a growing recognition of the importance of financial disclosures concerning nature and biodiversity. Read more: https://lnkd.in/dvZVbDir 🌏 Implications for Australian Businesses: - Enhanced Focus on Nature-Related Risks: Australian companies need to deepen their understanding of these risks, aligning with global trends. - Strengthening Internal Capabilities: Building capacity and expertise in nature-related financial disclosures is crucial. - Data Disclosure and Measurement: Developing methods for nature impact measurement and preparing for data disclosure, even if imperfect, is vital for transparency and sustainability. 📈 WBCSD TNFD Pilot Program: The WBCSD – World Business Council for Sustainable Development TNFD pilot offers insights into integrating nature-related risks into decision-making. Australian businesses can learn from this program, gaining guidance on complying with future TNFD framework standards. Discover more about the WBCSD TNFD pilot: https://lnkd.in/ev9Pfg3T For further details on TNFD framework and the Aldersgate Group's briefing, explore the full article here: https://lnkd.in/gAw8vFV4 #TNFD #Sustainability #NatureRelatedRisks #AustralianBusiness #CorporateResponsibility #EnvironmentalReporting Rachel Solomon Williams Tony Goldner Rayne van den Berg Angela Hawdon Julian Hill-Landolt

ESG ratings - a new potential conflict between US and Europe ? Last August S&P global ratings dropped ESG indicators from its credit rating. In the US there are more and more voices claiming the "end of ESG"... In Europe however the acronym is kick and alive as demonstrated by the negotiating mandate just approved by the EU Council for a Regulation on ESG rating...mind that we are talking of a Regulation and not a Directive. A Regulation is self executing and immediately applicable in all the EU countries. So what this Regulation will be about ? This is how it is presented by the EU: "The new rules aim to strengthen the reliability and comparability of ESG ratings by improving the transparency and integrity of the operations of ESG ratings providers, making ratings more comparable and preventing potential conflicts of interests. Under the proposed rules, ESG rating providers will need to be authorised and supervised by the European Securities and Markets Authority (ESMA) and comply with transparency requirements, in particular with regard to their methodology and sources of information. Providers will be subject to specific measures to prevent and manage conflicts of interests." It is expected that the discussions will start in earnest early next year under Belgian presidency. With the US elections looming, multinational companies will need to address various (possibly conflicting ) legislative initiatives ...being a CEO will increasingly look like being a captain navigating in arctic waters ! https://lnkd.in/em9exDFF