Over the last few years, momentum has gathered in the finance industry to play a part in pursuing a better and more sustainable future for all. In 2006, the United Nations announced its Principles for Responsible Investment, in 2015, the United Nations announced the Sustainable Development Goals and the Paris Agreement on climate change was introduce, in 2017, the Task Force on climate-related financial disclosures was introduced, and in 2018, the European Commission adopted a package of measures on sustainable finance which included:
- the Taxonomy Regulation which aims to establish an EU-wide classification system or “taxonomy” of environmentally sustainable activities;
- the Sustainable Finance Disclosure Regulation which requires require EU financial market participants and financial advisers (including investment firms providing portfolio management and/or financial advice, AIFMs, pension providers or insurance undertakings) to disclose how ESG factors are taken into account in investment decision-making processes and advisory processes; and
- the Low Carbon Benchmark Regulation which creates two new categories of benchmarks, Paris-aligned benchmarks (“PABs”) and Climate transition benchmarks (“CTBs”), which will help investors monitor the performance of their underlying investments against the targets set by the Paris Agreement on climate change.
We have drawn together the pieces of financial service regulation that are driving ESG from the finance perspective into an "impact" assessment with action points for buy-side/sell-side firms.
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