What has happened?
On 3 December 2020, three delegated regulations (Regulations) supplementing the EU Benchmark Regulation (EU Regulation 2016/1011) (EU BMR) were published in the Official Journal of the European Union. The Regulations specify new sustainability-driven disclosure rules for benchmark statements and benchmark methodologies, and prescribe minimum standards for EU climate transition benchmarks (CTBs) and EU Paris-aligned benchmarks (PABs).
The new rules supplement obligations that have technically applied under the EU BMR since 30 April 2020. However, as the detailed requirements had not been finalised by such date, the obligations have been the subject of regulatory forbearance by national competent authorities since then, pursuant to a No-Action Letter issued by ESMA.
What are the rules and when will they apply?
The key requirements under the Regulations are the same as under the versions adopted by the European Commission in July 2020, as covered in our briefing. The disclosure templates are also unchanged.
The Regulations will enter into force on 23 December 2020 and, for the most part, will apply from the same date. Exceptions to this are:
- the requirement to include certain Scope 3 GHG emissions data in CTB and PAB methodologies, which will apply from 23 December 2022 or 23 December 2024, depending on the sector; and
- the requirement to exclude certain types of companies from the composition of CTBs, which will apply from 31 December 2022.
Will the rules apply to UK entities after 31 December 2020?
As the Regulations will become applicable before the end of the Brexit transition period on 31 December 2020, they will be onshored into English law as part of the broader onshoring process.
Next steps
These are important developments for firms which administer benchmarks. The data required to be collated and published under the disclosure templates are technical in nature and not always readily available.
Benchmark administrators should consider:
- which benchmarks take into account ESG factors (or purport to do so);
- for those benchmarks which take into account ESG factors, whether the required data are readily available or need to be identified; and
- whether coordination with third parties who provide ESG data for existing benchmarks is required.
Early consideration of these issues is recommended as operational changes may be required.
Authors: Lorraine Johnston, Kirsty McAllister-Jones and Rachel Tan.
