EU Sustainable Finance Regulations: 2021 and Beyond

This piece provides an overview of key developments in the European Union’s (EU’s) Sustainable Finance Agenda that will play out in 2021 and beyond, including the implications of the European Green Deal and the Renewed Sustainable Finance Strategy for financial market participants and financial advisors. The European Central Bank’s (ECB’s) efforts on ESG will be discussed, and in particular, what Banking Union Supervised Institutions should consider in relation to the new compliance challenges. Finally, we provide details of a proposal for potential new regulatory requirements for ESG data providers.

EMEA Head of ESG Investment Strategy
Dr. Michael Huertas
Partner, Co-Head Financial Institutions Regulatory Europe at Dentons
Ciara Horigan
Regulatory & Government Affairs, State Street — EMEA

  • The European Green Deal and its legislative instruments will reshape the financial services landscape in Europe and potentially beyond. It is therefore being closely monitored globally.
  • SFDR comes into effect in March 2021, but some details remain unclear regarding practical implementation.
  • The ECB is accelerating its efforts to push the ESG agenda.
  • Discussions around regulation of ESG data providers are emerging.

As the executive branch of the EU, the European Commission (EC) has set two broad overarching sustainability principles.

The first is to increase investment in longer-term and sustainable activities and transform Europe’s economy into a greener, more resilient and circular system. This involves reducing pressures on the environment, addressing greenhouse gas emissions and tackling pollution, and minimising waste and improving efficiency in the use of natural resources. The EC has demonstrated leadership on this through its plan to issue €225 billion of green bonds as part of the Next Generation EU (NGEU) programme.

The second principle is to provide transparency on the risks that may have an impact on the sustainability of the financial system.