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Explore our latest insights to keep abreast of key legal developments.
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Key regulatory developments
2021 continued to be a year of great regulatory change in the ESG space in both the EU and the UK. A number of new regulations came into force and several further changes were proposed.
And of course, both COP26 and the transition to the Biden administration in the U.S. shone the spotlight on ESG across the world. In 2022, we expect to see a focus on how market participants can comply with their obligations under an increasingly complex global ESG framework.
Although most of these rules do not directly capture derivatives and structured products, asset/fund managers, insurers and pension providers will be caught. It is therefore important that banks in the derivatives and structured products space are aware of the regulation that their clients need to comply with, and we are increasingly seeing investors look to the banks to help them navigate their way through the regulation and to provide the information to allow them to make the relevant disclosures. It will also be key to think about how structured products are being marketed and what is disclosed in issue level documentation, particularly where such products are being promoted as green.
Sustainable structured products
We saw a wide range of sustainable structured products in 2021 and expect a significant rise in issuances in 2022.
2021 saw the market consider how derivatives can play a part in the sustainable finance drive and this looks set to continue in 2022, with the market expected to focus in particular on carbon trading and sustainability linked swaps (SLDs).
2021 saw benchmark administrators getting to grips with the Low Carbon Benchmark Regulation and the various delegated acts setting out the detail of the required disclosures. We expect a continued focus in 2022 on sustainable benchmarks, with many administrators looking to offer one of the two new benchmarks created pursuant to the Low Carbon Benchmark Regulation. The new Corporate Sustainability Reporting Directive which has been proposed to revise and enhance the ESG reporting rules currently in the Non-Financial Reporting Directive will also be of interest to benchmark administrators, as it may help to address the difficulties in accessing the necessary data that they face when complying with their disclosure obligations.
For more information, please see our ESG Legal Outlook 2022 and Financial Regulation Horizon Report 2022.
Explore further topics across our DSP Horizon Scanning 2022 publication
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