THE EUROPEAN ACTION PLAN ON SUSTAINABLE FINANCE: THE STATE OF PLAY

Autore: Dott. Enea Franza* 

 

Sommario:

La finanza sostenibile e responsabile è oggi un fenomeno in grande ascesa. In Italia e nel mondo i fattori ESG (finanziari ambientali, sociali e di governance) sono divenute drive per la distribuzione di prodotti e di servizi di investimento, in particolare i risparmiatori di tipo retail stanno mostrando attenzione ai profili di “sostenibilità” nella scelta dei propri investimenti. Si stima, infatti, che a livello mondiale gli asset investiti con criteri ESG superino i 30 mila miliardi di dollari, un valore che cresce del 34 per cento in due anni. In particolare, l’Europa si conferma l’epicentro della finanza responsabile; seguono gli Usa con il 39 per cento e, a distanza, il Giappone (7 per cento), il Canada (6 per cento), l’Australia e la Nuova Zelanda, col 2 per cento. Nel biennio appena trascorso il balzo in avanti più grande arriva dal Giappone, con investimenti in ESG triplicato in soli due anni. Una analisi dei dati, evidenzia, tuttavia, che circa 20 miliardi di dollari, seguono la strategia più basilare, che prevede di escludere dal portafoglio i settori ritenuti poco etici (tabacco, pornografia, bombe a grappolo, armi da fuoco e così via). Ciò, evidentemente, non incoraggia l’obiettivo di de-carbonizzazione, ovvero, il processo di riduzione del rapporto carbonio-idrogeno nelle fonti di energia, ovvero, in senso più ampio, il passaggio da società che utilizza combustibili fossili ad una che utilizza energie rinnovabili. In effetti, per conseguire gli obiettivi dell'UE per il 2030 concordati a Parigi, in particolare, la riduzione del 40% delle emissioni di gas a effetto serra, occorrono investimenti supplementari dell'ordine di 180 miliardi di euro all'anno, necessari per intervenire in maniera incisiva nelle politiche industriali, agricole e di incidere radicalmente nei comparti dell’edilizia e dei trasporti (per esempio, nel mondo dell’auto, il passaggio alla trazione elettrica).

Anche per questo motivo, partendo dalle raccomandazioni avanzate dal gruppo di esperti ad alto livello sulla finanza sostenibile, la Commissione ha da tempo stabilito una tabella di marcia per rafforzare il ruolo della finanza nella realizzazione di un'economia efficiente che consegua anche obiettivi ambientali e sociali e, all’inizio di marzo dello scorso anno, il Parlamento europeo (anche sull’onda del “fenomeno” Greta Thunberg) ha rilanciato il Piano d’azione sulla finanza sostenibile, obbligando gli operatori ad uno standard condiviso per la rendicontazione dei fattori ESG, per aumentarne la trasparenza, al fine di prevenire la comunicazione ingannevole sugli impatti ambientali (il cosiddetto "greenwashing"). Il lavoro tenta una sintesi raggionata delle iniziative finora assunte.

 

1.     Introduction

By adopting the Paris Agreement on Climate Change[1] and the United Nations 2030 Agenda for Sustainable Development, the European Union has committed itself to the goal of a more sustainable economy and society[2]. To achieve such growth, of course, each player in the company must do his or her part and the financial system is no exception and indeed is called upon to intervene as the engine of this necessary development; in this context, redirecting private capital towards more sustainable investments involves, in a necessarily long-term vision, a global review of the functioning of our financial system, which, however, guarantees, at the same time, its stability and ensures the greatest possible transparency[3]. On March 8, 2018, in light of the recommendations contained in the Final Report of January 2018 of the High-Level Expert Group on Sustainable Finance[4], and in line with the commitment made by the EU and its Member States with the climate pact of the 2015, the European Commission has published an "Action Plan for sustainable finance" (see below "Plan"), which outlines the strategy and measures to be adopted for the creation of a financial system capable of supporting the European Union program for climate and sustainable growth[5].

The "Plan" provides for the re-orientation of capital flows towards "green" investments, the management of financial risks deriving from climate change, environmental degradation and social issues and, an increase in the transparency of economic activities. Moreover, among the proposed actions there is that of creating a common language for sustainable finance, that is, a unified EU classification system (or "taxonomy") to define what is sustainable and identify the areas in which investments sustainable can have a greater impact. Consequently, based on this classification system, the "Plan" aims to create brands for the EU's "green" financial products, thus allowing investors to easily identify investments that comply with environmental or low-carbon criteria.
The Commission explains in the "Plan" the need to clarify the obligation, for asset managers and institutional investors, to take sustainability factors into account in the investment process and to make communication obligations more stringent, as well as to impose insurance and investment firms to advise customers based on their sustainability preferences. Another intervention envisaged in the aforementioned "Plan" concerns the integration of sustainability into prudential requirements. Banks and insurance companies, in fact, are an important source of external financing for the European economy; in this sense, the Commission takes charge of examining the feasibility of a calibration of the capital requirements of the banks (the so-called "green support factor") for sustainable investments, when this is justified in terms of risk, while ensuring at the same time, the stability of financial stability[6].

Finally, it is expected to improve transparency regarding corporate communications and in this sense it is proposed to revise the guidelines on non-financial information[7] to align it more closely with the recommendations of the Council's task force for financial stability on climate-related financial reporting [8].

Incidentally, it should be noted that from February 2016 the so-called "National dialogue for sustainable finance", promoted by the Ministry of the Environment and the United Nations environmental program. The dialogue saw the involvement of financial institutions and protagonists of the banking, insurance, savings and capital management markets. As stated in the final report presented at the Bank of Italy on 6 February 2017, the dialogue focused above all on the environmental dimension of sustainability, recalling the concept of green finance which aims not only at mobilizing the financial resources necessary for policies and environmental projects, but also to align all financial activities with sustainability needs.

The aforementioned Report highlights the strategic opportunity for Italy to direct its financial system in order to support the transition towards an inclusive, sustainable and low-carbon development model that reinforces the action to combat climate change. Underlines, in this context, the need to decouple economic growth from the environmental impact (decoupling)[9].

 

2. Disclosure Regulation

As part of the Sustainable Finance Action Plan, the European Commission has published the proposal for "Disclosure regulation on sustainability in the financial services sector" (hereinafter also "Regulation")[10] and, accordingly, on 7 March 2019, political agreement was reached in “Trigolo2"[11]. The final text of the Regulation was therefore approved by COREPER[12] on 27 March 2019 and, by the European Parliament on 18 April 2019. The Regulation will enter into force twenty days after its publication in the Official Journal of the Union and will be applicable, with some exceptions, by fifteenth month following said publication.

The Disclosure Regulation aims to harmonize the disclosure obligations of financial market participants[13] and financial advisers[14] regarding the so-called "Sustainability related disclosures to end-investors" and, therefore, the methods adopted for the integration in the investment choices and in the consultancy activity of the so-called "Sustainability factors" (ie, the so-called Environmental, Social and Governance factors, or more briefly, ESG)[15].

The aforementioned Regulation revolves around three main pillars: elimination of greenwashing, that is, of unfounded or misleading declarations on the characteristics and sustainability benefits of an investment product, increase in market knowledge regarding aspects of sustainability and regulatory neutrality, that is, definition of an information framework that the different operators of the financial market must apply identically.

The three European Supervisory Authorities[16] (ESAs), and in particular their Joint Committee, will ensure the convergence and harmonization of the information in all the sectors concerned, as well as to promote a level playing field, in the sense that the regulation regulates the following financial services sectors: i) investment funds; ii) insurance products with investment elements (life insurance products with investment components available both as individual retail life policies and as collective life policies); iii) private and professional pensions; iv) management of individual portfolios; v) insurance and investment consultancy.

The Regulation introduces a harmonized definition of "sustainable investments", meaning by these the investments in economic activities that contribute to the achievement of environmental or social objectives, or to a combination of them, without causing damage ("do not significantharm") To the other environmental and social objectives and adopts good corporate governance practices, with the ultimate aim of reducing information asymmetries regarding investments and sustainable risks in the relationship between intermediary and investor[17].
A point of reference for sustainable investments is represented by the six principles known as PRI (Principles for responsible investment), developed by an international group of institutional investors promoted by the United Nations Secretary General, which reflect the growing importance of ESG issues in practices of investment. More than 1,400 signatories from over 50 countries, with a total assets of 59,000 billion dollars, have (at the end of 2019) followed the initiative[18]. Those who adhere to the PRI undertake to incorporate ESG issues into the analysis and investment processes, into their corporate policies and practices, to seek transparency on these factors in the counterparties, to promote social responsibility in industry, to cooperate to achieve these purposes and to document the activities and progress made.

For these types of financial products[19], specific information obligations are provided for how the contribution to the sustainability objectives and the consistency of the benchmark possibly used with the characteristics pursued by the investment are pursued. Generally speaking, disclosure obligations are divided into five categories: (i) disclosure relating to policies adopted at entity level (financial market participants and financial advisers); (ii) pre-contractual information; (iii) information to be published on the website; (iv) periodic information and (v) information conveyed through marketing communications. For each category of disclosure obligations, the Disclosure Regulation assigns the ESAs the task of developing technical standards projects through the Joint Committee.

In May 2019, the Joint Committee of the ESAs established, within the Standing Committee Consumer Protection and Financial Innovation (JC-CPFI), a working subgroup with the mandate to develop drafts of technical standards and commissioned ESMA to coordinate its work. In relation to each category of disclosure obligations set out in the Regulation[20], the ESAs have the task of developing, through the Joint Committee, projects of technical standards, for a total of: n. 6 regulatory technical standards (that is, in short RTS) mandatory and n. 1 technical implementation standard (i.e. ITS for short) optional.

The six mandatory RTS concern:

a) the content, methods and presentation of the information that the Financial Market Participants (hereinafter also FMPs) and the Financial Authorities (hereinafter also FAs) must publish on their website, with regard to the main negative impacts of the decisions, or, investment recommendations on sustainability factors, cd adverse impact reporting;

b) the information that FMPs must include in the pre-contractual documentation required by sector legislation to illustrate:

- how products with environmental and/or social characteristics meet these characteristics and, if a benchmark has been identified, if and how this index is consistent with the sustainability characteristics of the product, as well as where the methodology can be found for the calculation of this benchmark;

- how products that target sustainable investments meet these objectives or, if a reference index has been designated, how the designated index is aligned with these objectives and if, and how, said index differs from a "broad market index”, as well as where the methodology for calculating the index can be found;

c) the content and presentation of the information to be published on the websites by the FMPs regarding the environmental or social characteristics and the sustainable investment objectives of the products and the evaluation, measurement and monitoring methodology used;

d) the information to be provided by the FMPs within the periodic reporting required by the sector legislation on the degree of achievement of the environmental or social characteristics of the products having such characteristics or, for products with the objective of sustainable investments, on the evaluation of the impact on global sustainability and, where a benchmark has been designated, on the comparison of this impact with the designated index and with a "broad market index".

The optional technical standard (ITS) concerns the standard for presenting information on the promotion of environmental or social characteristics and sustainable investments in marketing communications by FMPs and FAs. The regulatory technical standards (in short RTS) should be produced according to the following schedule: (i) within 12 months (from the entry into force of the Regulation) for RTS on adverse impact on environmental aspects, RTS on precontractual disclosure, RTS on precontractual disclosure, RTS on website disclosure, RTS on periodic disclosure; (ii) within 24 months (from the entry into force of the Regulation) for RTS on adverse impact on social aspects. Therefore, five of the six mandatory RTS must be submitted to the Commission within 12 months from the entry into force of the Regulation and only one within 24 months from the entry into force of the same, that is, the one on the declaration of the due diligence policies relating to the main negative impacts. investment decisions on sustainability factors in social and employee matters, respect for human rights, anti-corruption and bribery. The RTS are subject to the endorsement of the European Commission and come into force in the absence of objections from the European Parliament and the Council.

The discussions within the Standing Committee Consumer Protection and Financial Innovation (JC-CPFI) concerned, in particular, the issue of the distinction of financial products from those that have, among other things, the characteristic of promoting environmental impact and/or social and to encourage that the reference companies follow good corporate governance practices (products with sustainability characteristics) and those products that have the objective of "sustainable investment", that is, that invest in economic activities that contribute to the achievement of environmental objectives or social, or a combination of them, without harming other environmental and social objectives and are based on good corporate governance practices (products with a sustainability objective), as well as the theme of MOPs (financial-insurance products) for which discussed on the opportunity to provide pre-contractual information obligations relating to individual transactions oni investment, or, also with regard to the product itself, and in relation to the "Adverse sustainability impacts".

In particular, it is expected that information on the consideration of the main negative effects connected with investment decisions (i.e. recommendations) on sustainability factors[21] must be represented in a specific section of the website of the financial market participant, or of the financial adviser, called the "Adverse sustainability impacts statement"[22].

Further analyzes were carried out on the subject of pre-contractual disclosure, scaled down in favor of disclosure on the website or in reporting[23].

This would be motivated by the need, represented by EIOPA, to contain the length of the KID (Key Investor Information Document) in the case of PEPP (pan-European individual pension products) falling within the types referred to in articles 8 and 9 of the Disclosure Regulation. In particular, any reference to the methodology used to implement the investment strategy (including the criteria for the selection of the investment sectors, the data sources used, any limitations of the methodology) and to ensure the alignment with any reference parameter used.

 

3. Benchmark Regulation (BMR)

Given that, as is well known, the pricing of many financial instruments and financial contracts depends on the accuracy and integrity of the reference indices (benchmarks), in order to contribute to the proper functioning of the internal market and to ensure a high level of consumer and investor protection, the Benchmark Regulation (hereinafter also "the Regulation") has dictated harmonized standards for indices used as financial benchmarks in the European Union. On June 29, 2016 the Benchmark Regulation was published in the Official Journal of the European Union[24]. It applies to the supply of reference indices, to the contribution of data for reference indices and to the use of reference indices in the European Union. In particular, it introduces an authorization and supervision regime for the benchmark administrators - with the relative provision of specific organizational, operational and governance requirements - and defines specific requirements for the other supervised entities that contribute to the input data for the calculation of the benchmarks or who use it in the context of financial instruments, financial contracts and investment funds. The regulation also introduces measures to strengthen the objectivity, integrity and accuracy of the benchmarks and specific transparency measures.

Moreover, the European Commission, on May 24, 2018, published a "Proposal" for the modification of the aforementioned Regulation introducing, among other things, the provision of two new categories of reference indices that take into account some aspects of environmental sustainability: "EU Climate Transition Benchmarks" (EU CTBs) and "EU Paris-aligned Benchmarks" (EU PABs)[25].
The now definitive Proposal concluded the Trilogue phase on 25 February 2019, while the final compromise text was approved by COREPER on 13 March 2019. The changes concern the minimum requirements for the indices whose underlying activities follow a de-carbonization trajectory (EU CTBs) or are aligned with the objectives of the Paris Agreement adopted under the United Nations Framework Convention on Climate Change (EU PABs).

The Regulation also establishes some disclosure requirements for all benchmark managers (excluding those on interest rates and currencies) relating to the sustainability of the activities included in the indices which are also functional to the transparency obligations deriving from the disclosure regulation[26]. The Regulation will enter into force on the day following that of its publication in the Official Journal of the Union and will be applicable from 30 April 2020.

Furthermore, the Regulation delegates to the European Commission the power to adopt delegated acts on ESG benchmarks and benchmarks, in order to specify, among other things, the minimum content of the communication obligations to which administrators should be subject and to specify the minimum standards for the harmonization of the EU climate transition reference methodology and EU reference indices aligned with the Paris Agreement[27].

In June 2019, the Technical Expert Group on Sustainable Finance (TEG)[28], in line with the provisions of the Regulation, presented an interim report, which was followed by a final report of September 30, 2019 concerning the technical advice that will be used. by the Commission as a basis for the delegated acts of the regulation itself. In the technical opinion, the TEG recommends (i) minimum technical requirements for the methodologies concerning the two new types of benchmarks, with the aim of mitigating the risk of greenwashing, and (ii) disclosure requirements on ESG factors for all indices ( excluding, as mentioned, those on interest rates and currencies) in order to strengthen the transparency and comparability of information between the benchmarks. In detail, the TEG Report provides that stringent requirements must be met in order for a reference index to qualify as a European climate index, that is, EU Climate Transition Benchmark (EU CTB) and EU Paris-aligned Benchmark (EU PAB)[29].

In fact, the climate benchmarks must demonstrate a significant reduction in the overall intensity of greenhouse gas emissions compared to their investment universes. This assessment must gradually integrate emissions within a four-year period for sectors in which the impact on climate change is significant but located outside the direct operating borders (such as oil and gas and transport). This relative minimum carbonization is set at 30% for EU CTBs and 50% for EU PABs.

Moreover, the climate benchmarks must be sufficiently exposed to the sectors relevant for the fight against climate change, in other words, the de-carbonization[30] cannot take place through a shift in the allocation from sectors with high potential impact on climate change (for example energy, transport, production) to sectors with intrinsically limited impact (e.g. healthcare, media). The exposure to "high impact sectors" must therefore be at least the exposure of the underlying investment universe. Finally, climate-related benchmarks must demonstrate their ability to reduce their greenhouse gas emissions intensity on an annual basis. This minimum rate of "self-decarbonization" was set in accordance with the global de-carbonization trajectory implicit in the IPCC scenario: 1.5 ° C (without or with limited exceedance).

In addition, the percentage of greenhouse gas intensity reduction must be 7% on average per year. EU CTBs and EU PABs should exclude companies involved in arms (sale, production, etc.), companies that have operated in violations of global standards (ie the "UN Global Compact principles" and OECD Guidelines) or that are you have been involved in disputes resulting from significant damage to at least one of the six environmental objectives as well as companies that: 1. derive 1% or more of their revenue from coal exploration or processing activities; 2. derive 10% or more of their revenues from oil exploration or processing activities; 3. derive 50% or more of their revenues from exploration or processing of natural gas; 4. derive 50% or more of their revenues from the production of electricity with a greenhouse gas of the life cycle intensity greater than 100 gCO2e/kWh; in addition, the defined ratio of the "green to brown share coefficient" must be at least equal for EU CTBs and multiplied by at least 4 for EU PABs.

The benchmark Regulation also prescribes the criteria regarding the "transparency of the methodology" and the "Benchmark statement"[31].

The new disclosure requirements apply to a wide range of indices available on the market and in relation to the various underlying asset classes. The TEG proposes to establish disclosure requirements based on how the market currently understands that ESG factors and climate considerations can be integrated into the assessment of assets across various asset classes. Consequently, the recommendations on the minimum information for the methodology document and the specifications for the "benchmark statement" must be adapted based on the validity of the data relating to the ESG factors and the considerations for a specific class of activity and, consequently, the indicators are proposed by class of activity. ESG disclosure models are described, as well as specifications for publishing ESG information.

 

4. The Taxonomy Regulation

The classification system ("taxonomy") constitutes, in the intentions of the Board, the tool to give businesses and investors a clear and unambiguous definition of economic activities that can be considered eco-sustainable, in particular with the intention of reducing the fragmentation deriving from initiatives widespread on the market from national practices and "greenwashing", ie the practice of marketing financial products as "green" or "sustainable" but which, in reality, do not meet the basic environmental standards[32].

The Taxonomy Regulation, therefore, aims to limit the reference legal framework necessary for the establishment of uniform criteria to determine the environmental sustainability of an economic activity, in order to identify the degree of sustainability of an investment; it applies to measures taken by Member States or the Union that establish obligations for market operators with respect to financial products or corporate bonds marketed as eco-sustainable, as well as to participants in financial markets that offer financial products defined as eco-sustainable investments.

In particular, to be considered eco-sustainable, economic activities will have to contribute substantially to the achievement of at least one of the following six environmental objectives, namely, mitigation and adaptation to climate change, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, protection and restoration of biodiversity and ecosystems; moreover, they must not cause significant damage to any of the aforementioned environmental objectives, be carried out in compliance with the minimum social and housekeeper safeguard guarantees, comply with the technical screening criteria (established by the Commission with delegated acts for each environmental objective)[33]. In September 2019, the European institutions started the work of the Trilogue on the proposal for the Taxonomy Regulation, based on the general approach reached by the Council on 24 September 2019 and in accordance with the resolution of the European Parliament of 28 March 2019.

 

5. Delegated acts: MIFID, AIFMD, IDD and UCITS

The European Commission, as a whole of the legislative initiatives for sustainable finance put into consultation in May 2018, has also included the draft of a Regulation containing amendments to the Delegated Regulation (EU) 2017/565 implementing MiFID II - Markets In Financial Instruments Directive - and the Delegated Regulation (EU) 2017/2359 implementing the 2016/97 IDD - Insurance Distribution Directive.

The proposed amendments to the Delegated Regulation implementing MiFID II, published in January 2019, are aimed at integrating sustainable finance into the provision of investment services. In particular, the following areas are subject to review: organizational measures, including risk management and conflicts of interest management; customer information (e.g. on the nature and risks of financial instruments); adequacy assessment.With reference to customer information, changes are envisaged: i) the disclosure regarding the nature and risks of the financial instruments which must also take into account any ESG considerations; ii) the information on the individual management service with regard to the type of financial instruments that can be included in the client's portfolio, which must also be based on the preferences of the same in terms of sustainability; iii) the information to be provided in the advisory service regarding the description of the factors to be considered in the process of selecting the financial instruments to be recommended, which will also have to enhance ESG factors.

On the other hand, with regard to the adequacy assessment, the proposed changes are centered on the following profiles: i) in the acquisition and evaluation phase of the information relating to the client's investment objectives, any ESG-type preferences must be enhanced, in addition to the aspects of financial nature already considered; ii) as part of the processes and procedures aimed at ensuring adequate knowledge of the products they intend to recommend, any ESG considerations should be included; iii) in the suitability report intended for retail customers, evidence of the adequacy of the recommendation provided also due to the client's ESG preferences must be provided.

In parallel, the European Commission asked ESMA to provide a technical opinion on the identification of further possible changes to be made to the MiFID II implementation provisions on investment services, as well as to the implementation provisions of the UCITS directives (Undertakings for CollectiveInvestment in Transferable Securities) pursuant to European Parliament Directive 2009/65/EC of 13 January 2009[34] and Alternative Investment Fund Managers Directive (AIFMD) pursuant to European Parliament and Council Directive 2011/61/EU of 8 June 2011 in order to  achieve a complete integration of the sustainability profiles of investments within the current financial services regulation.

Consequently, on April 30, 2019 ESMA sent its technical advice ESMA35-43-1737 on MiFID II[35] to the European Commission, and document ESMA34-45-688, relating to the UCITS framework and the AIFM[36] framework. In detail, in the Technical advice relating to investment services (MiFID II),ESMA proposed interventions with reference to organizational measures, including risk management and conflicts of interest management, as well as the product governance discipline. Furthermore, interventions and modifications were also proposed with reference to the consulting and management service. In this regard, ESMA's proposals on the directive concern the modification of art. 21 "General organizational requirements", with the addition of ESG elements in company processes (for example, staff training) and the modification of art. 23 "Risk management", with the integration of sustainability risk in the policies and, therefore, in the risk management processes, introducing controls by compliance and internal audit.

As for the issue of "conflicts of interest", the ESMA proposal is substantiated in a new "Recital" with practical examples, as well as, in the principle that the distribution of sustainable products could be the source of new conflicts and, therefore, they must be identified and managed. Furthermore, the proposed amendments to the Delegated Regulation focus, first of all, on the requirements for producers and distributors of financial products, with the integration of ESG factors; in detail, on art. 9 "Requirements for producers", with the obligation to consider ESG elements in the definition of the reference market for products (where, of course, this was relevant) and in considering ESG elements also in the periodic review of products; mirror changes to those suggested for manufacturers are envisaged for distributors, pursuant to art. 10 reg. of the. "Requirements for distributors".

With reference, however, to the consulting and management service, the proposed changes concern, in particular, the "Collection of information", pursuant to art. 54 Reg. Del., Ie the obligation to collect information from customers regarding their preferences in environmental, social and governance matters, and the "Characteristics of the instruments", pursuant to art. 54 Reg. Del., As well as the obligation to consider the ESG characteristics of the products subject to investment advice and/or portfolio management (in addition to cost, risks and complexity). In the Technical advice relating to asset management (delegated acts of the UCITS and AIFM directives), changes were highlighted regarding the discipline regarding organizational measures, operating conditions of the activity and risk management. On April 30, 2019, EIOPA published a Technical advice concerning the integration of sustainable finance in the IDD disciplines (in addition to the aforementioned proposal for a delegated regulation from the European Commission) and Solvency II (EIOPA-BoS-19/172, "Integration of sustainability risks and factors in the delegated acts under Solvency II and IDD") to take into account ESG factors and risks in the context of the structuring of insurance products and distribution activities[37].

As regards the IDD, the changes proposed by EIOPA regarding the discipline of conflicts of interest are substantiated in the introduction of a new recital in the Delegated Regulation (EU) 2017/2359, which requires insurance companies and IBIP distributors ( that is, Insurance based investment products)[38] to take into consideration also the conflicts deriving from the consideration of ESG factors in the identification and management of conflicts of interest; in addition, also art. 3, par. 1, of the same Delegated Regulation, would be integrated with the provision that the ESG objectives of customers, where relevant, should be included among the factors to be considered in identifying the types of conflicts of interest that may arise in the context of the activity.

The ESG have become drives for the distribution of investment products and services, in particular retail savers are showing attention to the "sustainability" profiles in choosing their investments[39]. As evidence, the multiplication of advertising campaigns aimed at customers interested in the so-called sustainable investments[40].

Pending the definition and application of the legislative amendments, it should be noted that, however, the substantial current regulation contains certain instructions that intermediaries[41] must comply with in the provision of investment services, which allow to guarantee correct information on the characteristics of the products placed and, therefore on the ESG nature of the products. In particular, in the recent "Guidelines on some aspects of the adequacy requirements of MiFID II"[42], the European Authority (ESMA) has recognized as good practice for operators to evaluate non-financial elements when collecting information on the objectives of customer investment, also acquiring news about customer preferences on environmental, social and governance factors. Again according to the aforementioned Guidelines, this information should be sufficiently fragmented and consistent with the criteria adopted for the classification of sustainable products, and this to allow a complete consideration in the context of the adequacy assessment.Furthermore, in the "Guidelines on product governance obligations under MiFID II"[43], ESMA indicated in paragraph 18, letter e), that, within the "customer needs and objectives", a specific product can "be designed with particular characteristics to achieve specific investment objectives such as “…. the green investment, that is, the ethical investment, etc.". This indication, contained in the part of the Guidelines dedicated to "producers", is specifically referred to also for "distributors".

On the other hand, in the context of the regulation on advertising and promotional information and communications[44], the following obligations of intermediaries are relevant for the purposes of what is argued:

- to provide the customer with information that is correct, clear and not misleading, including in the context of advertising and promotional communications[45];

- to ensure that the information contained in marketing communications is in line with that provided to customers in the context of the provision of investment services and ancillary services[46];

- to provide customers or potential customers, in good time before providing them with investment services or ancillary services, a general description of the nature and risks of the financial instruments, taking into account, in particular, the classification of the customer as a retail customer, professional client or qualified counterparty[47].

On the other hand, in the domestic system, the additional information and reporting obligations provided for in Articles 136 and 137 of the aforementioned Intermediaries Regulation no. 20307/2018, relating to products and services qualified as "ethical" or "socially responsible". Finally, pursuant to Consob Resolution no. 17297/2010, the intermediaries must give account of the measures adopted and the controls carried out in the context of the periodic communications sent to Consob, and with specific reference to the reports on the methods of carrying out the investment services and activities ("Report on the organizational structure" for SGR and SGA that perform investment services and/or market their own or third party UCITS), it should be noted that, in addition to the periodic communication to be transmitted by March 31 of each year, any significant infra annual updates on company processes must be illustrated to Consob by sending a specific information, cd "Per event", in the terms provided by the aforementioned resolution 17297/2010.

All this having been said, however, cannot fail to highlight the need for rapid intervention to avoid that, in a context of information asymmetries and strong competition such as that of the financial market, intermediaries adopt behaviors that are not aligned with the care of the client's interest. passing off products that are not actually green (so-called green washing).

 

 6. European Ecolabel for financial products and green bond standards.

As we have already seen, the Commission's Action Plan envisages a specific conduct aimed at defining standards and brands for sustainable financial products. The Commission, in fact, believed that the presence of a dedicated brand contributes to protecting trust in the sustainable financial market and its integrity and could prove particularly useful for retail investors with ESG investment preferences, facilitating access to these products. It also notes that, on the contrary, the absence on the market of products bearing an appropriate identification mark may even prevent direct use of private capital for investments of this type. To this end, the Commission has announced, in the aforementioned Action Plan, that it intends to use the regulatory framework of the EU Ecolabel (European Regulation no. 66/2010) to create an optional brand assignment regime for sustainable financial products[48].

Consequently, the Environment DG of the European Commission launched, at the end of 2018, using the technical support of the Joint Research Center ("JRC") of the same Commission[49], the process to define the criteria for an optional Ecolabel on financial products. The draft criteria proposal, published in March 2019, identified a first group of financial products potentially affected by the brand and defined the criteria for investment in sustainable activities and the information-related obligations related to the use of the brand. In particular, the Ecolabel-branded financial products are PRIIPS (Packaged Retail Investment And Insurance-Based Investments)[50], UCITS (Undertakings for Collective Investments in Transferable Securities)[51] and RAIF (Retail Alternative Investment Funds) as well as insurance products with an investment component.

Therefore, five criteria are identified for the definition of the new Ecolabel, of which the first three concern the activity of the issuers (if corporate, sovereign states, etc.) whose financial instruments (i.e., shares and bonds in particular) are object of investment by the fund or, in any case, included in the structured product. The last two criteria deal with defining information and publicity obligations for the benefit of the retail investor and the general public. With regard to the first criterion, it concerns the selection of instruments to be included in the portfolio, according to a system of percentage investment thresholds; in fact, at least 70% of the portfolio's asset value is expected to be invested in "green economic activities". For the shares held in the portfolio, at least 90% must be attributable to a number of issuers with a turnover made up of at least 50% of "green activities", according to the definition of the Taxonomy Regulation. For bonds, however, at least 70% of the value of all the bonds included in the portfolio must fully comply with the Green Bond Standard of the European Union (EU GBS)[52]. To conclude, at national level it is represented that the work related to the Ecolabel is followed by the Ministry of the Environment that participates in the meetings at European level and that deals with involving issuers, managers, intermediaries and trade associations in order to collect useful information to be reported in the subsequent stages of the criteria definition process.

 

7. Other changes to frameworks conferred with the Action Plan.

In addition to the regulatory acts envisaged by the Action Plan on sustainable finance, the new approach determines the need for a series of "adjustments" on various regulatory acts, such as first of all the Regulation of the European Parliament and of the Council which amends the Regulations establishing the Authorities of European supervision, the EUVECA, EUSEF and ELTIF Regulation, the MiFIR Regulation, Regulation (EU) 2017/1129 (so-called "Prospectus Regulation") and the related delegated regulations (Delegated Regulation (EU) 2019/980 and Delegated Regulation (EU) 979 / 2019), Directive 2013/36 / EU and Regulation (EU) 575/2013 relating to CRD IV and CRR, as well as Regulation (EU) 2019/1238 (so-called "PEPP-pan-European individual pension products") and Directive (EU) 2017/828 (so-called "Shareholders Right"). In this sense, the corrections proposed in the Regulation amending the Regulations establishing the European Supervisory Authorities take note that the financial system takes on the challenges of sustainability and signal the general objective of sustainability in addition to the objectives already envisaged to strengthen stability and the effectiveness of the financial system across the European Union and to improve consumer and investor protection[53]; this means for supervisors the burden of helping to identify and report the risks that environmental, social and governance factors pose to financial stability and, as an authority with extensive knowledge of the financial sector, to provide guidance on how to integrate effectively sustainability considerations in the relevant EU financial legislation and promote their consistent implementation at the time of adoption. The amendments to the "Prospectus Regulation" (and the related delegated Regulations) essentially consist in the integration, in the information set relating to the offers of financial products of subjects subject to the prospectus obligation, of environmental, social and corporate governance risks, when they they can constitute specific and significant risks for the issuer and its securities; in particular, the description of the issuer's strategy and business objectives must take into account the issuer's challenges and future prospects, to the extent necessary to understand the issuer's performance, results or situation, with key indicators both financial and, if applicable, non-financial benefits relevant to the specific activity of the issuer.

More incisive, however, the changes to Regulation (EU) 2019/1238 c.d. PEPP (on pan-European individual pension products) published on 25 July 2019, which, as is known, establishes uniform rules on the registration, creation, distribution and supervision of individual pension products distributed in the Union. The changes start from the consideration that, firstly, both the adequacy of income and the financial sustainability (added part, ed.) Of national pension systems are essential for the stability of the Union as a whole[54] and that savings in PEPP should be invested taking “… into account ESG factors such as those set out in the Union's climate and sustainability objectives as defined in the Paris Agreement on Climate Change (Paris Agreement), the Sustainable Development Goals and the Guiding Principles of Nations United on business and human rights”[55].

In this way, "the PEPP will represent a step forward for the improvement of the integration of capital markets, thanks to its support for the long-term financing of the real economy, taking into account the long-term retirement character of the product and the sustainability of the investments". From this it follows that the "creation of an individual pension product that will have a long-term pension character" must take into account "the environmental, social and governance factors (ESG factors) referred to in the principles for responsible investment supported by the United Nations". Therefore, given that the individual pension product has the nature of long-term investments, it is expected that: "... PEPP suppliers are encouraged to allocate a sufficient part of their portfolio of assets in sustainable investments in the real economy, with economic benefits to long term.[56] In this way, "the PEPP will represent a step forward for the improvement of the integration of capital markets, thanks to its support for the long-term financing of the real economy, taking into account the long-term retirement character of the product and the sustainability of the investments". From this it follows that the "creation of an individual pension product that will have a long-term pension character" must take into account "the environmental, social and governance factors (ESG factors) referred to in the principles for responsible investment supported by the United Nations"[57]. Therefore, given that the individual pension product has the nature of long-term investments, it is expected that: "... PEPP suppliers are encouraged to allocate a sufficient part of their portfolio of assets in sustainable investments in the real economy, with economic benefits to long term"[58].

Also the Directive (EU) 2017/828 the so-called "Shareholders Right", which following the adoption on 3 September 2018 of the Implementing Regulation (EC) 2018/1212, must be implemented by 3 September 2020, provides for provisions related to sustainability. In effect, it addresses companies admitted to trading on a regulated market, and the subject matter relating to the identification principles of shareholders, the transparency of institutional investors, asset managers and voting consultants, as well as the involvement in defining the remuneration and transparency and control policies by shareholders on transactions with related parties, requires the disclosure of information relating to company policy and, therefore, also with reference to the sustainability of the activities put in place. See, in particular, Recitals 29[59], 20[60] and 22[61], as well as articles 9-bis "right to vote on the remuneration policy", 3-octies, paragraph 1, 3-nonies, paragraph 2 and 3-decies, paragraph 1.

 

 Dott. Enea Franza, Responsabile Ufficio Camera Conciliazione ed Arbitrato-Consob.

 

*The author's opinions are expressed on a personal basis and do not involve the institution where he works.

[1] The United Nations Framework Convention on Climate Change (UNFCCC) is the main international agreement on climate action and was one of the three conventions adopted at the Rio Earth Summit in 1992. So far it has been ratified by 195 countries. At the beginning it represented a tool that allowed countries to collaborate in order to limit the increase in global temperature and climate change and to face the consequences. The Council deals with two issues related to the UNFCCC: - the ratification of the Doha amendment to the Kyoto protocol, which concerns the commitments relating to the second period, from 2013 to 2020; - the Paris Agreement, a new global agreement on climate change extended to all UNFCCC countries, its ratification, implementation and entry into force in 2020. The Paris climate conference was held from 30 November to 11 December 2015, reaching a new global agreement on climate change on 12, which includes an action plan to limit global warming "well below" 2ºC. The Paris agreement entered into force on 4 November 2016, in following the fulfillment of the conditions for ratification by at least 55 countries which represent at least 55% of global greenhouse gas emissions. All EU countries have ratified the agreement.

[2] On 25 September 2015, the United Nations approved the 2030 Agenda for Sustainable Development and the related 17 Sustainable Development Goals (SDGs in the English acronym), divided into 169 Targets to be achieved by 2030. 17 points they are as follows: - End poverty in all its forms; - Eliminate hunger, achieve food security, improve nutrition and promote sustainable agriculture; - Ensure the health and well-being conditions for everyone at all ages; - Offer quality, inclusive and equal education and promote lifelong learning opportunities for all; - Education can really guarantee young people a better future; - Realize gender equality and improve women's living conditions; - Ensure the availability and sustainable management of water and hygiene conditions for all; Ensure access to clean, cheap and sustainable energy for all; - Promote lasting, inclusive and sustainable economic growth, full and productive employment and decent work for all; - Building resistant infrastructures, promoting sustainable and inclusive industrialization and promoting innovation; - Reduction of inequalities between countries; - Make cities and communities safe, inclusive, resistant and sustainable; - Guarantee sustainable consumption and production models; - Take urgent action to combat climate change and its impact; Safeguarding the oceans, seas and marine resources for their sustainable development; - Protect, restore and promote the sustainable use of terrestrial ecosystems, the sustainable management of forests, combat desertification, stop and reverse the degradation of the territory and stop the loss of biodiversity; - Promote peaceful and inclusive societies for sustainable development, guarantee access to justice for all, build effective, responsible and inclusive institutions at all levels; - Reinforce the meanings of implementation and revitalize global collaborations for sustainable development. See also https://www.unric.org/it/agenda-2030.

[3] In this regard, various models have been presented for measuring sustainable development for the company, one of these, the Capital Approach model, measures sustainable business development based on the relationship between the well-being of future generations and that of present generations. To sustain well-being over time, it is necessary to maintain or replace, as it is consumed, wealth (or capital) in its various forms which are: 1. Financial capital (eg shares, bonds, current accounts); 2. Production capital (eg plants, buildings, telecommunications and infrastructure in general; 3 Natural capital: natural resources, land, ecosystems; 4. Human capital: workforce; 5. Social capital: organisms, bodies and social networks. Second weak sustainability theory, to ensure the well-being of future generations, the sum of the various forms of capital must be kept constant over time: in the event that a type of wealth decreases, it must be replaced with another form of capital so to compensate for the loss. A stronger form of this approach argues, however, that natural capital cannot be replaced and that its destruction can be irreversible, therefore every form of capital must be handed down intact to future generations. See, OECD Review Sustainable development: Interaction between economy, society, environment OECD 2008.

[4] The High-Level Expert Group on Sustainable Finance (HLEG) is a group of experts set up in December 2016 by the European Commission with the task of developing guidelines for the development of sustainable finance in Europe; the objective was to direct the European capital market towards the financing of projects that promote "sustainable economic growth", that is, able to guarantee long-term well-being, social inclusion and reduction in the exploitation of natural resources and the environment. The working group included 20 representatives of actors from the financial industry, academia and civil society, supported by observers from European and international institutions. Among the members of the working group there was also Flavia Micilotta, who held the position of Executive Director of Eurosif. On 13 July 2017, the HLEG issued an Interim Report which was subjected to public consultation. On January 31, 2018 the Final Report was published with recommendations addressed to the European Commission.

[5] On 28 November 2018, the Commission presented "A clean planet for all", its long-term strategic vision for achieving a climate-neutral economy by 2050. The paths illustrated in the strategy are based on seven strategic components: greater efficiency energy; a more widespread diffusion of renewable energies; cleaner and more connected mobility; a competitive industry based on the circular economy; a series of intelligent and interconnected infrastructures; considerable development of the bio economy and natural carbon sinks; the use of carbon capture and storage. On 14 March 2019, Parliament adopted a resolution on climate change in which it welcomes the publication of the strategic vision, discusses the pathways aimed at eliminating net greenhouse gas emissions by 2050 and believes that this objective is the only one compatible with the Union's commitments under the Paris agreements. In June 2019, the European Council invited the Council and the Commission to continue work on the processes and tools to be adopted to ensure the transition to a zero climate impact EU. The European Council will define its guidelines by the end of 2019. The EU will submit its long-term strategy to the United Nations Framework Convention on Climate Change (UNFCCC) by 2020, in accordance with the demands of the Paris agreement.

[6] In this context, the Commission also invited ESMA to analyze the practices in place at the credit rating agencies regarding the use of ESG factors. ESMA, in the Technical Advice of 18 July 2019, highlighted, as a possible indication of policy for the European Commission, the option to amend Regulation (EC) no. 1060/2009 of the European Parliament and of the Council of 16 September 2009 relating to credit rating agencies (last amended by Regulation (EU) No. 462 / 2013- CRAs, expressly introducing provisions that provide for disclosure obligations for factors of sustainability used by a credit rating agency in its creditworthiness assessment processes and how they "impact" on the relative ratings. Furthermore, in the aforementioned Technical Advice, as a further possible indication of policy for the European Commission, provision is made also the assessment of whether the sustainability assessments prepared by various entities deserve, as happened for the rating judgments, a regulatory (and supervisory) safeguard, in order to protect the investors who use these assessments. ways to improve the quality and consistency of information relating to ESG factors within the judgments of rating, ESMA has observed how, said information, discloses and must be subject to disclosure, only in the event that they constitute elements underlying the assessment of creditworthiness; conversely, for such information there would be no mandatory disclosure obligation and the rating agency is not required to provide any "negative certification". Furthermore, ESMA suggests that rating agencies may provide a direct hypertext link to a specific section of their website, or better to an explanatory document, within the press release or report relating to a credit rating judgment. , which contain information about the ways in which it takes ESG factors into account in its evaluation processes. Furthermore, they must indicate in the press release or in the report the presence of ESG factors underlying the change in the rating or the outlook, providing a description of each of them and the reasons why they are to be considered "material" for the purposes of attribution of a judgment on creditworthiness and / or the related outlook.

[7] The Guidelines are intended to help companies draw up quality, relevant, useful, consistent and more comparable non-financial statements that can promote sustainable growth and employment and ensure transparency for stakeholders, in compliance with the obligations enshrined in the Directive. On June 26, 2017, the European Commission published the non-binding guidelines (Guidelines) on the methodology for communicating non-financial information pursuant to art. 2 of Directive 2014/95/EU on the reporting of non-financial information.

[8] President-elect Ursula von der Leyden placed climate policies first in its political orientations, underlining in the opening speech of the plenary session of the European Parliament on the 2019-2024 policy lines of the EU Commission (16 July 2019) as the challenge the health of the planet is more pressing than the Union in the new decade. Adhering to the goal of making Europe the world's first zero climate impact continent by 2050, it indicated as necessary: ​​- a two-step approach to reduce CO2 emissions by 50%, if not 55%, by 2030, while leading international negotiations aimed at increasing the level of ambition of the other major economies by 2021; - the presentation, within the first 100 days of the mandate, of a "Green Deal" for Europe: a "European law" on climate, which translates the objective of climate neutrality into legally binding provisions by 2050; - the strengthening of investments in the environmental sector, through the launch of an investment plan for a sustainable Europe (Sustainable Europe investmentplan) and the partial transformation of the EIB into a climate bank; - the revision of the emissions trading system, to include the maritime transport sector (and in the future also construction and the transport system); - the introduction of a carbon bordertax - CBT, to avoid carbon leakage and ensure that European companies can compete on equal terms; - the creation of a Just transition Fund, to be added to the cohesion funds to guarantee the fairness of the transition towards climate neutrality.

[9] https://www.minambiente.it/sites/default/files/archivio/notizie/report_financing_the_future_en_2.pdf.

[10] Proposal for a Regulation on disclosures relating to sustainable investments and sustainability risks and amending Directive (EU) 2016/2341, COM(2018) 354, del 24 maggio 2018.

[11] Three delegations participate in the "Trialogue", led respectively by an official of the European Commission; by a plenipotentiary of the Presidency of the EU Council; by the European Parliamentarian rapporteur on that topic. The text that came out of the "Trilogue" is then submitted - separately - for approval by the Parliament and the EU Council.

[12] The Permanent Representatives Committee (COREPER, from the French Comité des représentants permanents) is an organ of the Council of the European Union, composed of the heads or deputy heads of delegation of the member states to the European Union and a large number of committees and groups of employment subordinated to it. Its main task is to prepare ministerial meetings of the Council of the European Union. COREPER plays a fundamental role in the development of EU policies, since much of the negotiation between member states on the decisions to be taken takes place internally.

[13] That is, investment firms and credit institutions that provide portfolio management services, insurance firms that offer insurance investment products (IBIPs) to retail or professional investors, managers of alternative funds, UCITS funds or EuVECA funds o EuSEF, corporate or professional pension institutions, producers of pension funds and PEPP (art.2 point n.1 of the Regulation).

[14] Insurance intermediaries that provide insurance advisory services regarding IBIPs, credit institutions and investment firms that provide investment advisory services, UCITS and alternative fund managers who provide investment advisory services (art 2 point 11 of the Regulation).

[15] ESG stands for Environmental, Stakeholder and Governance and indicates sustainability-conscious investors.

[16] The three European supervisory authorities (ESAs), in particular the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority constitute, together with the national supervisory authorities of the Member States, the micro prudential pillar of supervision of EU financial markets. While the current supervision of financial institutions remains the responsibility of the European Supervisory Authorities, the mission of the European Supervisory Authorities is to develop and enforce a common regulatory framework and convergent prudential practices within the EU, in particular it is for the European Supervisory Authorities to advise the EU bodies on the legislative process, develop and regulatory standards and coordinate national supervisors. They are joined by the European Systemic Risk Board (ESRB) responsible for macro-prudential supervision of financial markets, which draws up warnings and recommendations for risk limitation measures and monitors their implementation. However, the ESRB is part of the European Central Bank as a body with no legal personality.

[17] The United Nations defined sustainable investment, on the occasion of the launch of the Principles for responsible investment (UNPRI) in 2005, responsible investment "... an approach to investment that aims to integrate environmental, social and governance factors (ESG) in investment decisions, to better manage risk and generate long-term sustainable returns "(see: https://www.unpri.org/pri/what-is-responsible-investment"). In general, in 2013 by the Working Group of the Forum of Sustainable Finance, he intended for sustainable and responsible investment that investment that aims to create value for the investor and for society as a whole through, however, an investment strategy oriented to medium-long term which, in the evaluation of companies and institutions, integrates financial analysis with environmental, social and good governance analysis.

[18] See: Principles for responsible investment, cf www.unpri.org.

[19] Recall that the category of financial products includes: UCITS and AIF funds, IBIPs, pension products and pension schemes, portfolio management service and PEPPs.

[20] That is, information relating to the intermediary's policies; pre-contractual information; information to be published on the intermediary's website; periodic information and information disclosed through marketing communications.

[21] In order to identify and evaluate the actual and potential adverse sustainability impacts, a minimum list of mandatory indicators (listed in Annex I of the RTS draft) and an additional list of indicators to be used on an optional basis (always indicated in the Annex) are included. I of the RTS draft) and the related methodologies. The optional indicators on environmental and social factors are also quantitative/qualitative and have been identified with the contribution of the Joint Research Center of the European Commission and with the EEA (European Environment Agency). Where the information relating to any of the indicators is not readily available, the financial market participants will have to do their best ("best effort basis") to acquire it and, in case of impossibility, they will have to evaluate the adverse impacts on the basis of reasonable assumptions to be illustrated in the statement.

[22] The statement must comply with certain requirements (concise and understandable, easily accessible, printable and free of charge) and must indicate the date of publication. On the same section of the site, the statements of the last 10 years must be published and kept for comparison. The statement must provide information on the policies adopted to identify the main negative effects, the actions taken and to be taken to reduce these impacts must be described (e.g. exercise of the right to vote, letters to the management of the companies in which you invest, etc.) illustrating its effectiveness through, for example, indicators.

[23] In a first circulated draft, it was hypothesized to provide information relating to the ESG characteristics of the product, the chosen investment strategy and the data and methodology used to implement this strategy (with a high level of information detail). In addition, the disclosure was developed by differentiating between information relating to products with ESG characteristics and information relating to products with an ESG objective, also with reference to the index designated as the reference benchmark. The method of representing the aforementioned information was developed in specific templates attached to the RTS draft.

[24] Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds. With Legislative Decree 13 February 2019, n. 19 the rules for the adaptation of the national legislation to the provisions of Regulation (EU) 2016/1011 were issued, on the indices used as benchmarks in financial instruments and in financial contracts or to measure the performance of investment funds and amending the directives 2008/48 / CE and 2014/17 / UE and of the regulation (UE) n. 596/2014, as well as the adaptation of national legislation to the provisions of Regulation (EU) 2015/2365, on the transparency of securities financing transactions and re-use and which amends Regulation (EU) no. 648/2012. Published in the Official Gazette no. 61 of 13 March 2019.

[25] Proposal for a Regulationamending Regulation (EU) 2016/1011 on low carbon benchmarks and positive carbon impact benchmarks, COM(2018) 355, del 24 maggio 2018. V. nota al TIAN del 12 aprile 2019.

[26] The Benchmark Regulation is modified in order to introduce: 1) additional disclosure obligations relating to all benchmarks (excluding those on interest rates and currencies) for sustainability profiles); 2) a regulatory framework that establishes minimum requirements for the EU climate transition reference indices (defining such those whose underlying assets are selected, weighted or excluded so that the portfolio to which the index refers follows a de-carbonization trajectory ) and the EU reference indices aligned with the Paris Agreement at Union level (defining them as those in which: a) the underlying assets are selected, weighted or excluded so that the issues of the portfolio to which the index refers are aligned with the objectives of the Paris Agreement adopted under the United Nations Framework Convention on Climate Change; b) the activities related to the underlying activities do not significantly damage other ESG objectives).

[27] The power to adopt delegated acts is conferred on the Commission for a period of five years from the date of entry into force of the Benchmark regulation.

[28] The Technical Expert Group on Sustainable Finance (TEG) is a group of 35 experts on sustainable finance, set up by the European Commission. Its function is to support the Commission in implementing the Action Plan approved in May 2018, through in-depth studies on: SRI taxonomy, or a unique system of classification of economic activities that can be defined as "sustainable" (with priority to the issues of mitigation and adaptation to climate change); improvement of the guidelines on the reporting of activities related to climate change by banks, insurance companies and other large companies; common criteria for the construction of low-carbon and positive-carbon impact benchmarks, that is, reliable reference parameters to reduce the risk of greenwashing and increase market transparency; Green Bond Standard, a European quality certification for green bonds. The TEG started its work in July 2018. The mandate of the SRI taxonomy, benchmark and Green Bond Standard subgroups, whose completion was expected in June 2019, has been officially extended until the end of 2019. The members of the TEGs come from civil society, academia and finance, as well as from European and international public bodies. The TEG works through plenary sessions and subgroup meetings which have been established for each of the four study themes.

[29] Vedi: https://ec.europa.eu/info/publications/sustainable-finance-technical-expert-group_en

[30] In detail, the main statistics indicate that the world's fossil CO2 emissions in 2018 touched 37.1 gigatons (therefore 37.1 billion tons of carbon dioxide). The increase compared to 1990 is 63%. In 2017, the 6 largest CO2 producers (China, USA, European Union, India, Russia and Japan) emitted 68% of the global fossil carbon dioxide. However, all except the USA (-0.8%) compared to 2016 increased emissions: India (+3.5%), the European Union and Russia (+1.1%), China (+0.9%) and Japan (+0.1%). China produced 9.8 billion tons, USA 5.3, EU28 3.5 while India 2.5. Together they make up 58% of global CO2 emissions. CO2 emissions in Europe decreased by 19.5% compared to 1990 and by 16.5% compared to 2005. Global CO2 emissions in 2017 depend on: 40% of coal, 35% of oil, for 20% from gas, 4% from cement and 1% from other forms of combustion.

[31] Vedi: Article 13 BMR Transparency of methodology) end Article 27 BMR Benchmark statement.

[32] The issue of ethical finance products in the broadest sense has been present for years in the financial landscape, they are not European. In this context, we point out the "green bonds", or Green Bond, relatively new financial instruments, but which have known a rate of extraordinary growth from 2007 to today. They are bonds like all the others, whose emission is linked to projects that have a positive impact on the environment, such as energy efficiency, the production of energy from clean sources, the sustainable use of land, etc. The issue of Green Bonds is added to that of Social Bonds and Sustainable Bonds. Social Bonds represent a bond loan aimed at supporting initiatives of high social interest and allow individual economic objectives (to obtain an adequate return on the investment) to be combined in the investment choices with those of general interest values ​​(to favor the realization of initiatives that create value for society). Through Sustainable Bonds, on the other hand, investors are offered the opportunity to combine their financial objectives with those of social and environmental sustainability, to support sustainable projects in the beneficiary member countries. These projects are aimed at reducing poverty and developing various sectors such as, for example, education, health, agriculture and infrastructure.

[33] See: Technical Expert Group on Sustainable Finance - Taxonomy pack for feedback and workshops invitations, December 2019"…. An EU taxonomy would fill these gaps, as it would inter alia: • create a uniform and harmonised classification system, which determines the activities that can be regarded as environmentally sustainable for investment purposes across the EU; • address and avoid further market fragmentation and barriers to cross-border capital flows as currently some Member States apply different taxonomies; • provide all market participants and consumers with a common understanding and a common language of which economic activities can unambiguously be considered environmentally sustainable/green; • provide appropriate signals and more certainty to economic actors by creating a common understanding and single system of classification while avoiding market fragmentation • protect private investors by avoiding risks of green-washing (i.e. preventing that marketing is used to promote the perception that an organization's products, aims or policies are environmentally-friendly when they are in fact not); • provide the basis for further policy action in the area of sustainable finance, including standards, labels, and any potential changes to prudential rules”.https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/sustainable-finance-taxonomy-feedback-and-workshops_en.pdf 

[34] Commission Delegated Directive (EU) 2017/593 of 7 April 2016 which integrates Directive 2014/65/EU of the European Parliament and of the Council as regards the protection of financial instruments and client funds, the governance obligations of products and the applicable rules for the provision or receipt of monetary or non-monetary fees, commissions or benefits.

[35]https://www.esma.europa.eu/sites/default/files/library/esma35-43-737_final_report_on_integrating_sustainability _risks_and_factors_in_the_mifid_ii.pdf.

[36]https://www.esma.europa.eu/sites/default/files/library/esma34-45-688_final_report_on_integrating

_sustainability_risks_and_factors_in_the_ucits_directive_and_the_aifmd.pdf

[37] The draft regulation amending delegated regulation (EU) 2359/2017 is aimed at integrating the rules concerning the adequacy assessments of the products being distributed, also taking into consideration any customer preferences regarding ESG. EIOPA's Technical Advice is aimed instead at identifying the content of a delegated regulation amending the delegated acts of the Solvency II and IDD directives, with a view to including sustainable finance in the provisions concerning conflicts of interest and product governance.

[38] IDD defines IBIP as an insurance product that has a maturity or redemption value and in which that maturity or redemption value is exposed in whole or in part, directly or indirectly, to market fluctuations, and does not include: - i non-life insurance products listed in Annex I of Directive 2009/138/EC (Non-life insurance branches); - life insurance contracts, where the benefits provided for in the contract are due only in the event of death or inability due to injury, illness or disability; - pension products which, under national law, are recognized as having the primary purpose of offering the investor an income during retirement and which allow the investor to enjoy certain advantages; - the officially recognized business or professional pension schemes that fall within the scope of Directive 2003/41/EC or Directive 2009/138/EC; - the individual pension products for which national law requires an employer financial contribution and in which the worker or employer cannot choose the supplier or pension product.

[39] The Observatory on sustainable lifestyle created by LifeGate in collaboration with Eumetra MR, shows that in Italy there are almost 38 million individuals interested in ESG issues - i.e. 74% of the population - which means almost 10 million more than in 2017. The data disclosed during the event of NN Investment Partners, confirm this trend also in the field of investments. 8% of the interviewees, equal to about 4 million Italians (with an incremental trend of +2% compared to 2017) is in fact aware of the existence of solutions for environmental and social sustainability. Of these, 2% have already invested part of their savings in sustainable investment funds (equal to approximately 1 million Italians), the remaining 6% have not yet decided whether to choose this type of product. 24% have heard of it but do not know exactly what it is and 68% have never heard of it. Regarding the propensity to choose different investment opportunities, for the same return, 76% of the sample interviewed would opt for a sustainable investment.

[40] Purposeful communication has been a marketing trend since 2019: according to the results of the second edition of the monitoring "Communication that is good for you. To the environment", an analysis of the Italian creativity of companies that combine advertising with responsibility, 173 brands embraced the theme of environmental sustainability in the second quarter of 2019 (from May to September 2019), there were 85 in the first quarter of 2018, an acceleration of + 51%. The study conducted by BeIntelligent - EG Media's online platform - in collaboration with The Easy Way, registered 429 unique creatives used in advertising messages from May to September 2019 .. The first evidence of the analysis is the solicitation to which the consumer is subjected: just over a year ago there were only 146 environmental-themed creatives (compared to the current 429): an increase of 66%, which means a growing incentive to consider ecological issues and to assimilate them to responsible business conduct.

[41] Ex art. 35, paragraph 1, lett. b) of the Intermediaries Regulation n.20307/2018: Intermediaries are to be considered "... the SIM, including the companies referred to in Article 60, paragraph 4, of Legislative Decree no. 415 of 1996, the Italian banks authorized to provide investment services and activities, the asset management companies authorized to provide the portfolio management service, the investment advisory service and the reception and transmission service of orders, the EU management companies that provide the portfolio management service and the investment advisory service in Italy, through a branch establishment, the EU AIFMs with a branch in Italy, which provide the portfolio management service, the investment advisory service and the order reception and transmission service, investment firms and EU banks with branches in Italy, as well as third country firms authorized in Italy to provide investment services and activities. "Authorized intermediaries" or "intermediaries" are also understood to be the brokers, the financial intermediaries registered in the register provided for in article 106 of the TUB, the company Poste Italiane - Banco Posta Services Division authorized pursuant to article 2 of the Presidential Decree n. 144 of 14 March 2001, limited to the provision of investment services and activities to which they are authorized ". Incidentally, the regulation on investment services also applies to independent financial advisors pursuant to art. 18-bis of the d. lgs. n. 58/1998 and to the financial consultancy companies referred to in art. 18-ter of the same d. lgs. n. 58/1998, pursuant to the provisions of the Intermediaries Regulation, implementing art. 31, paragraph 6, of the d. lgs. n. 58/1998, as amended by art. 9, paragraph 1, lett. o) of the European Delegation Law 2014, n. 114 of 9 July 2015, in accordance with art 3 of MiFID II. From 1 December 2018, the supervisory powers over these subjects are the responsibility of the Financial Advisors Body, pursuant to art. 13, paragraph 1-ter, of the decree-law of 16 October 2017, n. 148 c.d. D.L. Fisco (converted with law n.172 of 4 December 2017).

[42] http://www.consob.it/documents/46180/46181/esma35_43_1163.pdf/0594badd-e955-4338-9b41-b3104da0fbf2, for the Italian version of 6 November 2018 (ESMA35-43-1163 IT). On November 29, 2018, through a specific notice, Consob communicated that it complies with the Guidelines in question, integrating them into its supervisory practices.

[43] http://www.consob.it/documents/46180/46181/esma35_43_620.pdf/c52e9667-eaeb-4276-b2f6-ded69d9e940a, for the Italian version of 5 February 2018 (ESMA35-43-620 IT). On 22 February, through a specific notice, Consob communicated that it complies with the Guidelines in question, integrating them into its supervisory practices.

[44] See art. 36, of the Intermediaries Regulation n. 20307/2018 and the articles referred to there in the Delegated Regulation (EU) 2017/565.

[45] See art. 36, of the Intermediaries Regulation n. 20307/2018.

[46] See art. 46, paragraph 5, of the Delegated Regulation (EU) 2017/565.

[47] See art. 48, paragraph 1, of the Delegated Regulation (EU) 2017/565.

[48] The EU Ecolabel system is included in the Community policy on sustainable consumption and production, the aim of which is to reduce the negative impacts of consumption and production on the environment, health, climate and natural resources. The system is intended to promote, through the use of the EU Ecolabel, products that have high environmental performance. In this sense, the EU Ecolabel is the European Union's eco-label which distinguishes the products and services which, while representing the standardized performance standards, are characterized by a reduced environmental impact throughout the entire life cycle. The label is the European environmental certification mark for products and services born in 1992 with the certification of the European regulation n. 880/92. 

[49] The Joint Research Center (JRC), (in English: Joint Research Center, JRC), is a directorate-general of the European Commission: DG-JRC (Directorate-General Joint Research Center), which has seven research institutes spread across five European Union member countries (Belgium, Germany, Italy, the Netherlands and Spain).

[50] PRIIPs are products whose value is subject to fluctuations due to exposure to reference variables or to the performance of one or more underlying assets. They are characterized by an assembly process aimed at creating products that have different exposures, characteristics or cost structures than direct holding. They are mutual investment funds, insurance products with an investment component (unit-linked etc.), structured products and deposits, convertible bonds, derivatives and products issued by SPV.

[51] This is an harmonized open fund governed by European law pursuant to Directive 2009/65 / EC (Collective Investment Schemes - UCITS). UCITS funds, established as investment companies (SICAVs) or as investment funds (FCP), can be marketed throughout the European Union, and subscribed by all categories of investors (institutional, qualified and retail).

[52] The Action Plan provides that the TEG, as part of the measures aimed at creating standards and brands for sustainable financial products, publishes a report on the definition of a European standard on green bonds (EU-GBS), which was then published in June 2019. The EU Green Bond Standard Report proposes to the Commission a standard for green bonds which any issuer of bonds or other debt instruments can adhere to on a voluntary basis. In this way, any debt instrument issued by an issuer (of the Union or not) can be classified as an EU Green Bond when it is aligned with the EU-GBS.

[53] Recitals 1, 8 and 9 as well as articles 1, 2 and 3 of the Regulation.

[54] Recital 4: "A substantial part of old-age pensions is paid under public schemes. Without prejudice to the exclusive national competence regarding the organization of pension systems, as established by the treaties, the adequacy of income and the financial sustainability of national pension systems are essential for the stability of the Union as a whole".

[55] Recital 51: "Given that the investments relating to individual pension products are long-term, particular attention should be paid to the long-term consequences of the allocation of assets. In particular, ESG factors should be taken into account. Savings in PEPP should be invested taking into account ESG factors such as those set out in the Union's climate and sustainability objectives as defined in the Paris Agreement on Climate Change (Paris Agreement), the Sustainable Development Goals and United Nations Guiding Principles on Business and Human Rights".

[56] Recital 11: “The Capital Markets Union will help mobilize capital in Europe and channel it to all businesses, including small and medium-sized enterprises, infrastructure and long-term sustainable projects, which need it to expand and create jobs. work. [...] To this end, the PEPP will represent a step forward for the improvement of the integration of capital markets, thanks to its support for the long-term financing of the real economy, taking into account the long-term retirement character of the product and the investment sustainability.”

[57]  Recital 8: "This regulation allows the creation of an individual pension product which will have a long-term pension character and will take into account the environmental, social and governance factors (ESG factors) referred to in the principles for responsible investment supported by the Nations. Unite as far as possible will be simple, secure, reasonably priced, transparent, consumer friendly and portable at Union level and will integrate existing systems in the Member States";

[58]  Recital 49: “Considering the long-term nature of their liabilities, PEPP providers are encouraged to allocate a sufficient part of their portfolio of assets in sustainable investments in the real economy, with long-term economic benefits, particularly in projects and infrastructure companies".

[59] Recital 29: “The remuneration policy should contribute to the corporate strategy, long-term interests and sustainability of the company and not depend in whole or in part on short-term objectives. Directors' results should be assessed using both financial and non-financial criteria, including, where appropriate, environmental, social and governmental factors”.

[60] Recital 20: "states that asset managers provide sufficient information to the institutional investor to enable it to assess" whether and how the manager acts in the investor's best long-term interest and whether the asset manager implements a strategy that allows an efficient commitment of the shareholders […]. This disclosure should include the report on the main medium and long-term material risks associated with portfolio investments, including corporate governance issues and other medium and long-term risks”.

[61] Recital 22: "The asset manager should also inform the institutional investor if the asset manager makes investment decisions based on an assessment of the medium and long-term results of the investee company, including non-financial results, and if so in what ways".