Clock ticking on EU’s sustainable finance legislation

The EU’s sustainable finance legislation is coming into view for the investment industry, despite some ongoing uncertainty over implementation deadlines. But, says Linklaters Luxembourg partner Martin Mager, with further changes to e.g. the MiFID, AIFMD and UCITS regimes on the horizon, this is only the start.

Despite the disruption to both legislative processes and the operations of financial services and other businesses stemming from the Covid-19 pandemic and the economic and social restrictions imposed by governments to curb its spread, the various elements of the European Commission’s sustainable finance package are advancing toward implementation.

Already enacted is the Disclosure Regulation, which is designed to provide transparency about the environmental, social responsibility and governance profile of financial service providers as well as about how products billed as sustainable or ESG-compliant meet their goals. So is the new Benchmarks Regulation, which amends existing EU rules on benchmarks to incorporate two new types of sustainable benchmark for assessing the compliance of assets or investment products.

The third element of the Commission’s package, the Taxonomy Regulation, is winding its way through the final stages of the legislative process, having survived arguments between member states about, notably, the role of nuclear power in achieving climate change goals. The legislation, which provides a classification and methodology for assessing the environment-friendliness of different types of economic activity, was approved by the European Council on 15 April and the European Parliament is scheduled to adopt it during its June session.

Read the full interview of Martin Mager on sustainable finance here.