contributes to an environmental objective as measured, for example, by key resource efficiency indicators on the use of energy, renewable energy, raw materials, water and land, on the production of waste, and greenhouse gas emissions, or on its impact on biodiversity and the circular economy; or. Anna Maleva-Otto is a partner and Joshua Wright is an associate at Schulte Roth & Zabel LLP. 1. (i) products promoting environmental or social characteristics or a combination of these characteristics; and. For financial products that have sustainable investment as their objective, a description will need to include the "overall sustainability‐related impact of the financial product by means of relevant sustainability indicators". Having a deep understanding of our clients' industries and the challenges that they face is key to delivering excellent legal advice. Subject to any further clarifications or guidance which may be published in the future, this could mean that the pre-investment disclosure obligations will apply not only to EU/UK AIFMs who market their EU or non-EU funds, but also to non-EU AIFMs (e.g., US or Swiss investment managers) who market their Cayman and other non-EU funds under Article 42 private placement regimes in the UK or any EU jurisdictions. Other elements of the package include proposed amendments to MiFID II, [3] AIFMD and UCITS [4] that will require asset managers to integrate ESG considerations into their organisational and operational controls, and risk management processes. 1Regulation (EU) 2019/2088, available here. Where no EU Climate Transition Benchmark or EU Paris‐aligned Benchmark is available, the information must include a detailed explanation of "how the continued effort of attaining the objective of reducing carbon emissions is ensured in view of achieving the long‐term global warming objectives of the Paris Agreement". 2. such investments do not significantly harm any of those objectives and that the investee companies follow good governance practices, in particular with respect to sound management structures, employee relations, remuneration of staff and tax compliance. environmental, social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters). The EU regulation on Sustainability-Related Disclosures (“Disclosure Regulation”) [1] will take effect on March 10, 2021. Many of the requirements of the Disclosure Regulation will apply to investment managers that do not focus on ESG mandates. N.B The Taxonomy Regulation contains further definitions on the meaning of environmentally sustainable economic activities and provides clarification on the principle of "do not significantly harm". Climate Risk Disclosure Act of 2018, 115 S. 3481, 2018 S. 3481. It is cross-referred to by other legislation in the EU Action Plan on sustainable finance and introduces a common criteria for determining which economic activities can be considered environmentally sustainable. The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. This post is based on their SRZ memorandum. Material personally selected by your relationship manager for your interest. With a network spanning Asia, Australia, Europe, the Middle East and North America, we offer global reach and insight combined with the knowledge and understanding of local markets. Asset managers and investment advisers will be required to take the following steps to comply with the Disclosure Regulation: 1. proportionality). It also introduces amendments to the Disclosure Regulation, adding additional requirements for ESG products with certain characteristics as provided for under the Disclosure Regulation (explained further below) so as to allow investors to identify the share of investments funding environmentally sustainable economic activities. Such firms will need to publish, on their website, information on due diligence policies with respect to those impacts, taking due account of their size, the nature and scale of their activities and the types of financial products they make available. not only those managing ESG funds or funds with a sustainable investment objective). This is evident in the insightful material we produce and news coverage we receive. Our global industry teams work together to share knowledge and experience so that we can provide our clients with insightful, innovative commercial advice. Sign up to receive the latest legal developments, insights and news from Ashurst. For more information on how we use cookies, or how to change your browser settings, please see our Cookie Policy. If you have forgotten your password, you can request a new one here. The recitals to the Disclosure Regulation states that these requirements are intended to sit alongside provisions in AIFMD and other EU legislation concerning remuneration (e.g. This information will include details on how principal adverse sustainability impacts are prioritised, brief summaries of engagement policies, reference to any adherence to responsible business conduct codes and internationally recognised standards for due diligence and reporting. The Disclosure Regulation defines “sustainability risk” as an ESG “event or condition that, if it occurs, could cause a negative material impact on the value of the investment”. At Ashurst, we believe innovation means only one thing: continuous and disruptive improvement in all that we do - for the benefit of our clients, our employees and our wider corporate social responsibility. The Disclosure Regulation, part of the EU Sustainable Action Plan, provides a central schedule of obligations for environmental, social and governance (“ESG”) related disclosures in the EU financial services sector. a description of the environmental or social characteristics or the sustainable investment objective; information on the methodologies used to assess, measure and monitor the environmental or social characteristics or the impact of the sustainable investments selected for the financial product, including its data sources, screening criteria for the underlying assets; and. I also want to thank the … The Disclosure Regulation applies to asset managers pursuing any strategy not only impact funds, or products marketed as “ESG-friendly” although there are more onerous obligations for funds which specifically promote sustainability characteristics or This will require certain firms, including asset and fund managers, to comply with new rules on disclosure as regards sustainable investments and sustainability risks. The Disclosure Regulation will require AIFMs, UCITS management companies, as well as portfolio managers and investment advisers authorised under MiFID, to implement policies and make certain disclosures (on a “comply or explain” basis) with regards to sustainability risks and sustainability factors relevant to their investment activities. It is yet another indicator that environmental, social and governance matters are growing in importance as a compliance issue for financial institutions. Let me start with a warm welcome to our newest colleague, Commissioner Crenshaw. By signing up, you agree to receive commercial messages from us. These legislative initiatives also include the draft Taxonomy Regulation [2] which establishes a framework for classifying financial products as “sustainable investments”—a measure directed at tackling so-called “greenwashing” of financial products. You may unsubscribe at any time. However, 2021 has for some time been pencilled into the regulatory calendar as a year of change for ESG. The Disclosure Regulation covers alternative investment fund managers (as defined in AIFMD) [5] without specifying the territorial scope or status of such AIFMs under AIFMD. “Sustainability factors” are environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters. the manner in which sustainability risks are integrated into their investment decisions (i.e. Firms that have opted to consider the principal adverse impacts of investment decisions on sustainability factors are required to integrate in their due diligence processes procedures for considering these impacts. (ii) financial products which have sustainable investment as their objective. Environmental, social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters. (go back), 6See 2020 Examination Priorities, available here. ​Scroll through these slides to access the personalised features of your Dashboard. (go back), 3Draft Commission Delegated Regulation amending Regulation (EU) 2017/565, available here. Readers should take legal advice before applying it to specific issues or transactions. In March 2021, the EU's Disclosure Regulation will come into force, with the EU's Taxonomy Regulation following in 2022. Specific requirements include pre-contractual disclosures; disclosures on websites and disclosures in periodic reports in relation to financial products. See Cristie Ford, “Principles-based Securities Regulation in the Wake of the … Disclosures will also be required at product level to substantiate how ESG objectives are met. The Disclosure Regulation seeks to harmonise existing provisions on disclosures to investors in relation to sustainability-related disclosures by imposing requirements on so-called financial market participants (e.g.

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