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  • Studio Paci

🌐ESA Publish Final Report on Standard Technical Regulations🌐

📜 Introduction 📜


The three European Supervisory Authorities (EBA, EIOPA, ESMA - ESA) have recently released a final report that amends the Regulatory Technical Standards (RTS) for financial products.

This document concludes the review of key disclosure rules under the Sustainable Finance Disclosure Regulation (SFDR).


🌍 Context and Objectives of the ESA 🌍


The ESA aim to provide end investors with comparable information to choose investments in eco-sustainable economic activities.

The final report introduces new disclosures for financial products, including greenhouse gas emissions reduction targets and carbon footprint.


🔍 Analysis of Key Changes 🔍

  • Expansion of the PAI List: Now includes social indicators such as exposure to tobacco companies, workers with inadequate wages, and gender pay gap.

  • Innovations in Disclosure: Introduction of a simplified dashboard to provide key information on the sustainability of financial products.

  • Measurement of EU Taxonomy Alignment: Use of specific graphs and methodologies to demonstrate investments' alignment with the EU taxonomy, including environmental sustainability criteria.

  • Compliance Certification: Option for an external auditor's certification to verify financial activities' compliance with environmental sustainability criteria.


📈 Impact and Significance for the Financial Sector 📈


These changes have significant implications for the financial sector.

A major shift is that an investment aligned with the EU taxonomy will not automatically be deemed sustainable under the SFDR; further analysis of principal adverse impacts (PAI) is required.


🔮 Next Steps and Final Considerations 🔮


Following the ESA report publication, the European Commission will have three months to decide whether to approve the draft RTS.

The potential application of the new RTS is independent of an ongoing SFDR review, announced in September 2023.


🔎 Consumer Feedback and Testing 🔎


Recently, the ESA conducted consumer tests in Italy and other European countries to better understand investors' perceptions of "sustainable investments" and related disclosures.

These tests revealed difficulties among respondents in distinguishing between different definitions of sustainable investments, suggesting the need for greater clarity and precision in disclosures.


🌿 Implications for Sustainability and Governance 🌿


The RTS update aims to strengthen investor protection by improving transparency on environmental, social, and governance (ESG) information.

This aligns with the growing commitment to sustainability in the financial sector, highlighting the importance of clear and precise communication about sustainable financial products.

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