International Platform on Sustainable Finance
Common Ground Taxonomy - IPSF publishes updated documents -3 June 2022
The International Platform on Sustainable Finance (IPSF) has published several documents related to its Common Ground Taxonomy (CGT), a comparison between the adopted EU taxonomy for sustainable activities and the China green finance taxonomy. The IPSF was launched in October 2019 to provide a forum for dialogue between policymakers, with the overall aim of increasing the amount of private capital being invested in environmentally sustainable investments.
The current version of the CGT covers 72 climate change mitigation activities that share common ground between the EU and China taxonomies with regard to the “substantial contribution” criteria. As well as an updated report on the CGT, the IPSF has published an amended table of relevant activities and a new set of FAQs.
IPSF: updated report: Common Ground Taxonomy – climate change mitigation
Updated table of activities
Summary of consultation responses (24 February 2022)
FAQs on the Common Ground Taxonomy Table
Updated webpage
European Commission
SFDR - European Commission publishes letter to ESAs - 9 June 2022
The European Commission (the Commission) has published a letter sent to the European Supervisory Authorities (ESAs) (namely, the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority) regarding amendments to regulatory technical standards (RTS) under the Sustainable Finance Disclosure Regulation (EU 2019/2088) (SFDR). The letter follows the Commission’s adoption of: (i) the RTS in the SFDR Delegated Regulation (C(2022) 1931 (final)), in April 2022; and (ii) a Complementary Climate Delegated Regulation (C(2022) 631 (final)) covering nuclear and fossil gas activities, in March 2022.
The Commission invites the ESAs to jointly propose amendments to the RTS in the SFDR Delegated Regulation regarding the information that should be provided in pre-contractual documents, on websites, and in periodic reports about the exposure of financial products to investments in fossil gas and nuclear energy activities, by 30 September 2022. This is to ensure that investors receive information reflecting the provisions set out in the Complementary Climate Delegated Regulation.
European Commission letter from John Berrigan to the European Supervisory Authorities: amendments to regulatory technical standards under the Sustainable Finance Disclosure Regulation ((EU) 2019/2088) (Ares(2022)2798608)
Council of the European Union and European Parliament
Distributed ledger technology - Regulation (EU) 2022/858 on a pilot regime for market infrastructures based on distributed ledger technology published in the OJ - 2 June 2022
Regulation (EU) 2022/858 on a pilot regime for market infrastructures based on distributed ledger technology (DLT), amending the Markets in Financial Instruments Regulation (600/2014/EU), the Central Securities Depositories Regulation (909/2014/EU) and the Markets in Financial Instruments Directive 2014/65/EU, has been published in the Official Journal of the European Union.
The Regulation aims to develop the trading and settlement of “tokenised” securities. In particular, it aims to ensure more efficient, secure, and cost-effective management of the data stored on blockchains while preserving its quality, usability and comparability. The Council of the EU (the Council) published the revised text of the proposed Regulation on 1 June 2022 (PE-CONS 88/2/21 REV 2), as previously reported in this Bulletin. The European Parliament and the Council adopted the Regulation on 24 March 2022 and 12 April 2022. It will come into force on 22 June 2022 and will apply for the most part nine months later.
Regulation (EU) 2022/858 of the European Parliament and of the Council of 30 May 2022 on a pilot regime for market infrastructures based on distributed ledger technology, and amending Regulations (EU) No 600/2014 and (EU) No 909/2014 and Directive 2014/65/EU
Regulation of the European Parliament and of the Council on a pilot regime for market infrastructures based on distributed ledger technology, and amending Regulations (EU) No 600/2014 and (EU) No 909/2014 and Directive 2014/65/EU (PE-CONS 88/2/21 REV 2)
European Supervisory Authorities
SFDR - ESAs publish clarifications on scope of disclosures - 2 June 2022
Three European Supervisory Authorities (ESAs) (namely, the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority) have published a statement clarifying aspects of the draft regulatory technical standards (RTS) issued under the Sustainable Finance Disclosure Regulation (SFDR). The statement follows “numerous requests for clarifications received from stakeholders and national competent authorities relating to the practical implications and given the significant breadth and technical complexity of these rules.”
The statement clarifies the disclosure of principal adverse impacts (PAI) of investment decisions on sustainability factors and the applicable calculation methodology. It also sets out guidance on pre-contractual and periodic financial product disclosures; the meaning of “minimum proportion” taxonomy-related financial product disclosures; “do not significantly harm” disclosures; and disclosures for financial products with investment options.
The document refers to the European Commission's November 2021 announcement, as previously reported in this Bulletin, that the RTS' application date would be delayed to 1 January 2023.
Clarifications on the ESAs’ draft RTS under SFDR
EBA press release
UK Government
EU proposed Directive on corporate sustainability due diligence - BEIS publishes letter - 7 June 2022
The Department for Business, Energy and Industrial Strategy (BEIS) has published a letter (dated 23 May 2022) from Lord Callanan, Minister for Business, Energy and Corporate Responsibility, to Darren Jones MP, Chair of the BEIS Committee. The letter follows earlier correspondence from Mr Jones (dated 25 March 2022) on the European Commission’s (the Commission’s) proposal for a Directive on corporate sustainability due diligence.
The letter notes that the UK government “supports voluntary due diligence approaches by UK businesses … as steered by several international frameworks” and “does not intend to replicate the European Commission’s proposal for cross cutting mandatory due diligence in the UK’s framework of corporate governance and reporting”. It also refers to the development by the International Sustainability Standards Board of international standards to harmonise ESG reporting and the UK government’s commitment to strengthening section 54 of the Modern Slavery Act 2015.
More specifically on the Commission’s proposal, Lord Callanan comments that “[i]t is not yet clear how many UK companies will fall directly within the scope” but cautions that “in addition to large companies directly in scope, it is highly likely that small and medium-sized enterprises would be affected where in value chains supplying EU companies in scope.”
Letter from Lord Callanan, Minister for Business, Energy and Corporate Responsibility: EU proposed Directive on corporate sustainability due diligence
HM Treasury
A regime for critical third party service providers to the financial sector - HM Treasury publishes policy paper - 8 June 2022
HM Treasury has published a policy paper on its proposal for mitigating risks from critical third party service providers to the financial sector. The proposal was developed with the Bank of England, the PRA and the FCA (the Regulators) to enable the direct oversight of services that critical third parties provide to firms. It aims to be flexible and proportionate, to ensure that the UK is able to harness the benefits of outsourcing, whilst combatting the systemic risk it poses.
Notable aspects of the proposed critical third party regime are as follows:
- HM Treasury will be able to designate certain third parties as ‘critical’, in consultation with the Regulators and other bodies. Designation will be made by secondary legislation, taking into account high-level criteria such as the number and type of services a third party provides to firms and the materiality of these services. The designation framework will be set out in primary legislation;
- Once designated as ‘critical’, the Regulators will be able to exercise a range of powers in respect of any material services that the third party provides to the financial sector. In particular, the Regulators will be able to make rules relating to the provision of material services, gather relevant information from critical third parties, and take formal action (including enforcement) where needed;
- A rule-making power will allow the Regulators to set minimum resilience standards to be met by critical third parties in respect of any material services provided to the UK financial sector. Regulators will also have the power to require critical third parties to take part in a range of targeted forms of resilience testing.
The Regulators will publish a joint discussion paper on the exercise of their powers, exploring their role in the designation of third parties as ‘critical’ and the potential ways in which they may coordinate the exercise of their powers with oversees financial regulators as well as UK authorities and regulators outside the financial services sector.
The government intends to legislate for the new regime when parliamentary time allows after which the discussion paper will be published. Following royal assent, the Regulators anticipate publishing a further consultation paper on their proposed rules. Once the Regulators’ rules are finalised, HM Treasury expects to begin designating the first critical third parties under the new regime.
HM Treasury Policy Paper: Critical third parties to the finance sector
Webpage
Financial Conduct Authority
Preventing claims management phoenixing - FCA publishes Policy Statement (PS22/6) - 7 June 2022
The FCA has published a Policy Statement (PS22/6) setting out final rules and guidance prohibiting Claims Management Companies (CMCs) from carrying out regulated claims management activities on claims and potential claims to the Financial Services Compensation Scheme (FSCS) where they have relevant connections to the claims. The rules in the Policy Statement also require CMC firms to notify the FCA of relevant connections they have to financial services firms. The Policy Statement follows the FCA’s May 2021 Consultation Paper (CP21/14).
The FCA explains that claims management phoenixing occurs when individuals from financial services firms later reappear in connection with CMCs and charge consumers for seeking compensation against their former firm’s poor conduct by bringing claims to the FSCS.
The rules and guidance will come into force on 7 July 2022.
FCA Policy Statement: Preventing claims management phoenixing by financial services firms (PS22/6)
Webpage
Financial Ombudsman Service
New Chief Executive and Chief Ombudsman - announced by FOS - 8 June 2022
The Financial Ombudsman Service has announced the appointment of Abby Thomas to the role of Chief Executive and Chief Ombudsman. She will take up the new role in the autumn, replacing current interim Chief Executive and Chief Ombudsman, Nausicaa Delfas.
Ms Thomas began her career as a strategy consultant, moving to industry in 2014. She currently works for Virgin Media O2, where she has led Virgin Media consumer operations, with responsibility for service call centres, field force and supply chain leadership, and more recently their flagship ‘B2B Transformation’ programme.
Press release
