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Sustainability Disclosures
December 4, 2023

The European Supervisory Authorities (ESAs) have published their Final Report amending the draft Regulatory Technical Standards (RTS), proposing new mandatory reporting on social factors and greenhouse gas (GHG) emission reduction targets for financial products under the Sustainable Finance Disclosure Regulation (SFDR). The SFDR is part of the EU’s Action Plan on financing sustainable growth, aiming to establish harmonized rules for financial market participants on transparency regarding sustainability risks and impacts.

The ESAs’ review proposes an extension of the list of principal adverse impact (PAI) indicators, which detail the adverse impacts of investment decisions on sustainability factors. New mandatory PAI indicators include exposure to companies active in tobacco production, employees earning less than an adequate wage, and modified indicators for investments in companies involved in violations of the OECD Guidelines for Multinational Enterprises, and for the gender pay gap.

The regulators also developed draft RTS for new disclosures regarding GHG emissions reduction targets for financial products with such objectives. Requirements include disclosure in pre-contractual documents on the alignment of the target with the goal of limiting global warming to 1.5 degrees C, and periodic report disclosure on progress.

The European Commission will have three months to decide whether to endorse the draft RTS following the publication of the ESAs’ report

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