Additional clarifications on anti-greenwashing standards for financial products in the European Union | Jones Day

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In its Sustainable Finance Roadmap 2022-2024, the European Securities and Markets Authority (“ESMA”) recently highlighted the importance of developing a consistent supervisory approach in the area of ​​sustainable finance across Europe. . Aware that the growing demand from investors for environmental, social and governance (“ESG”) financial products and the fragmentation of the reading of ESG rules create room for maneuver for greenwashing, ESMA has underlined its intention to work in close collaboration with EU national regulators to combat greenwashing through coordinated action. practices over the next two years.

In the area of ​​asset management, greenwashing has been a concern of EU regulators for some years, as some asset managers, in an effort to satisfy growing investor demands, have exaggerated the sustainability profile and characteristics of the funds they manage/market. Regulators have become particularly attentive to these practices and expect asset managers to justify the ESG claims they put forward.

Regulation 2019/2088 of November 27, 2019 on sustainability disclosures in the financial services sector (the “SFDR Regulation”), which entered into force on March 10, 2021 in all EU Member States, imposes significant additional disclosure requirements on its entities within scope, such as investment managers and investment firms providing investment advice. The objective of the SFDR Regulation is to prevent the greenwashing of financial products and financial advice in the EU by imposing on entities within the scope, including asset managers and investment advisers, the obligation to provide more substantiated and sustainability-related information to enable investors to make informed investment decisions in line with their sustainability goals.

In this context, on 6 April 2022, the European Commission adopted Regulatory Technical Standards (“RTS”) to be used by financial market participants when disclosing sustainability-related information under the SFDR Regulation. The RTS aim to standardize information on ESG investments in order to improve the transparency and comparability of this information. They include guidelines regarding content details and presentation of information in relation to the principle of “do no significant harm” (also used in the taxonomic regulations). This includes guidelines regarding the content, methodologies and presentation of information relating to sustainability indicators and negative impacts on sustainability, as well as the content and presentation of information relating to the promotion of environmental or social characteristics and objectives. of sustainable investment in the pre-contractual documents, on the websites and in the periodic reports.

The standards include a “comply or explain” mechanism, which obliges market participants to “comply” with the rules by providing precise qualitative and quantitative information describing the efforts made to reduce the negative environmental and social impacts of investments, or “explain” why some investments don’t. cause environmental or social injustice. The standards also outline rules for website disclosures and periodic product-level disclosures about financial products. The technical standards will now be subject to scrutiny by the European Parliament and the Council over the next three months, and in the event of no objection, the RTS will then apply from 1 January 2023.

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