The European Commission (EC) introduced an action plan on financing sustainable growth in March 2018, which included strengthening sustainability disclosure. These new regulations require financial institutions (banks, investment firms, and insurance companies) to disclose how they integrate environmental, social, and governance (ESG) risks into their decision-making processes. The main aim is to improve transparency and accountability in the financial sector and encourage more sustainable investment practices.
In May 2018, a proposal for a regulation on sustainability-related disclosure in the financial services sector was put forward and adopted as part of the sustainable finance package. The Sustainable Finance Disclosures Regulation (SFDR) imposes sustainability disclosure obligations on manufacturers of financial products and financial advisers in relation to the integration of sustainability risks in all investment processes and for financial products that pursue sustainable investment objectives. It also requires disclosure of adverse impacts on sustainability matters at entity and financial product levels.
The EC adopted regulatory technical standards on 6 April 2022, which specify the content, methodology, and presentation of sustainability-related information to be disclosed by financial market participants under the SFDR. Compliance with these requirements will contribute to strengthening investor protection and reducing greenwashing. The requirements apply from 1 January 2023.
Sustainability disclosure obligations – transparency and accountability – emissions reporting
