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The European Union’s ‘Action Plan on Financing Sustainable Growth’ has published into law two new categories of climate benchmarks and ESG disclosures for benchmarks. What are the implications for investors?
As part of the EU effort to transition to a sustainable economy , the European Commission published an ‘Action Plan on Financing Sustainable Growth’ in May 2018 with the aim to integrate sustainability risks, opportunities and targets into the European regulatory framework and to mobilise investment towards sustainable growth.
The Action Plan outlines several legislative initiatives, the first package of which includes an EU classification system/Taxonomy to determine whether an economic activity is sustainable, disclosure requirements for a range of financial market participants and new measures regarding investment benchmarks. The Commission set up a Technical Expert Group on Sustainable Finance (TEG) to assist in developing some of these initiatives.
This guide focusses on the introduction of two new categories of climate benchmarks and associated ESG disclosures applicable to all benchmarks. The new climate benchmarks provide for a harmonised, reliable tool to pursue low-carbon investment strategies by establishing a new category of financial benchmarks.
Benchmark administrators must comply with the new requirements by 30 April 2020. The new requirements will be incorporated into the EU Benchmarks Regulation, which is separately under review by the Commission and will likely result in strengthened supervision and governance of climate benchmark administrators.
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