Sustainable Finance: Commission adopts new rules for EU Climate Benchmarks

As part of the European Commission’s sustainable finance agenda, new rules have today been adopted which set out minimum technical requirements for EU Climate Benchmarks, as well as a number of Environmental, Social and Governance (ESG) disclosure requirements. EU Climate Benchmarks help investors who wish to adopt climate-conscious investment strategies and make informed decisions. They address the risks of greenwashing, the practice of financial products being marketed as ‘green’ or more generally ‘sustainable’, when in fact they do not meet basic environmental standards. Today’s delegated act sets out the technical requirements that a benchmark needs to include if it is to be labelled as an EU Climate Benchmark. For example, the sectors to which the benchmark is allocated are required toreduce their carbon emissions from one year to the next, and exclude assets that significantly harm ESG objectives. Today’s new rules also set out a number of Environmental, Social and Governance (ESG) disclosure requirements for benchmark administrators, including disclosures related to the Paris Agreement – the first-ever universal, legally binding global climate change agreement. This delegated act will further contribute to an increased level of transparency and comparability on the products offered to the public. Executive Vice-President Valdis Dombrovskis, responsible for Financial Stability, Financial Services and Capital Markets Union, said: “One of the main objectives of our Sustainable Finance policy is to harness the power of private capital to achieve a climate-neutral economy by 2050. Today’s delegated acts will help climate-conscious investors who want to make the right decision and invest in our transition towards a climate-neutral economy. Every step we take counts.” The new requirements are based on the work of the Technical Expert Group on Sustainable Finance (TEG), which delivered a report on 30 September 2019, complemented by a Handbook published in December 2019 (see here). Today’s new rules are available online here.