Climate and the Financial Sector Newsletter

December 26, 2024

This newsletter highlights climate-related regulatory, litigation and enforcement developments relevant to the financial sector.

General

European Union

Regulation on ESG rating activities published in the EU Official Journal
ESMA consults on proposals to digitalise sustainability and financial disclosures
European Commission adopts Delegated Regulation on RTS on sustainability information under MiCAR
EFRAG releases the Voluntary Sustainability Reporting Standard for non-listed SMEs
ESMA technical advice on amendments to CRA regulatory framework concerning ESG factors in credit rating methodologies
Minor amendments to certain language versions of the Climate Delegated Act under the Taxonomy Regulation published in the EU Official Journal

France

French AMF publishes an educational report on listed companies’ sustainability reporting
French AMF encourages financial institutions to continue their efforts to improve the transparency of their Taxonomy reporting

Italy

Consob launches a public consultation for certain amendments to the Issuers’ Regulation on sustainable reporting
Consob Highlights Importance of Climate Reporting in Financial Statements

Germany

German federal ministers call for CSRD postponement

Asset Management

European Union

ESMA releases Q&As on the application of the Guidelines on funds’ names
EU Platform on Sustainable Finance reports on product categorisation under SFDR

Banking

Italy

Publication of the Document for Sustainability Dialogue between SMEs and Banks by the Table for Sustainable Finance

Insurance

European Union

EIOPA and ECB put forward a possible EU approach to reduce economic impact of natural catastrophes
EIOPA publishes 2025 annual work programme, including sustainable finance priorities

France

ACPR publishes results of 2023-2024 climate stress test on insurers

General

European Union

12 December 2024 [EU] – Regulation on ESG rating activities published in the EU Official Journal

Regulation (EU) 2024/3005 on the transparency and integrity of environmental, social and governance rating activities was published in the Official Journal of the European Union [the regulation is available here; please refer to our newsletter of 26 November 2024, available here, for more information on the regulation]. The Regulation establishes a regulatory regime for ESG rating providers operating in the European Union. It will enter into force on 2 January 2025 and will be applicable from 2 July 2026.

13 December 2024 [EU] – ESMA consults on proposals to digitalise sustainability and financial disclosures

The European Securities and Markets Authority (ESMA) has published a consultation paper [available here] inviting stakeholders to provide their views on how the European Single Electronic Format (ESEF) can be applied to sustainability reporting under the CSRD, including disclosures under the Taxonomy Regulation (Regulation (EU) 2020/852). The consultation is open until 31 March 2025, with ESMA expected to publish a final report in Q3 2025. The consultation paper includes proposals to (i) define the digitally tagging rules for sustainability reporting, with a phased implementation for sustainability statements under the European Sustainability Reporting Standards (ESRS) and a full implementation for disclosures under Article 8 of the Taxonomy Regulation, and (ii) redefine the digitally tagging approach for Notes to IFRS consolidated financial statements. In the consultation paper, ESMA also proposes to amend the Commission Delegated Regulation (EU) 2016/1437 on the European Electronic Access Point (EEAP) to align its requirements with the implementing technical standards on the tasks of collection bodies and the establishment of the upcoming European Single Access Point project.

17 December 2024 [EU] – European Commission adopts Delegated Regulation on RTS on sustainability information under MiCAR

The European Commission adopted the Delegated Regulation supplementing the Market in Crypto Assets Regulation (2023/1114/EU) (MiCAR) with regard to regulatory technical standards specifying the content, methodologies, and presentation of information in respect of sustainability indicators in relation to adverse impacts on the climate and other environment‐related adverse impacts [available here]. The Regulation was adopted in accordance with Article 6(12), Article 19(11), Article 51(15) and Article 66(6) of MiCAR, which mandate the European Securities and Markets Authority (ESMA), in cooperation with the European Banking Authority (EBA), to develop these standards and empower the Commission to adopt them.

Preliminarily, MiCAR establishes a comprehensive framework governing the issuance and servicing of crypto-assets not otherwise regulated by existing financial legislation. It seeks to foster sustainable innovation while addressing risks to consumers, financial stability, and market integrity. In line with this objective, MiCAR also obliges crypto-asset issuers and service providers to disclose the principal adverse impacts on the environment, particularly those related to the consensus mechanisms used to issue or validate crypto-assets, with significant energy consumption and environmental implications.

Specifically, Articles 19(1), 51(1) and 6(1) of MiCAR set out requirements to disclose the principal adverse impacts on the climate and other environment-related adverse impacts of the consensus mechanisms used to issue a crypto-asset in the white papers for asset-referenced tokens (ARTs), for e-money tokens (EMTs) and for crypto-assets other than ARTs and EMTs. Article 66(5) of MiCAR obliges crypto-asset service providers to publish on their website information concerning the principal adverse impacts on the climate and other environment-related adverse impacts of the consensus mechanism used to issue each crypto-asset in relation to which they provide services. The Delegated Regulation aims to provide investors with accurate, clear, and comparable information about the environmental effects of the technologies underpinning crypto-asset issuance. To this end, the new legal framework specifies the requirements for the presentation of environment-related information, the obligations for disclosures in the white papers, the general principles for the presentation of information by crypto-asset service providers, and the obligations for disclosure on their websites.

17 December 2024 [EU] – EFRAG releases the Voluntary Sustainability Reporting Standard for non-listed SMEs

EFRAG has published its technical advice on the voluntary reporting standard for non-listed micro-, small-, medium sized undertakings (VSME) [see here for the VSME Standard and here for educational videos]. The VSME consists of two modules: a Basic Module, which is the target approach for micro-undertakings and a minimum requirement for other entities; and a Comprehensive Module, which sets out additional data points likely to be requested by SMEs’ business partners, including banks, investors and corporate clients, on top of the Basic Module. It builds on the input received from stakeholders during the public consultation on the exposure draft of the VSME from 22 January 2024 to 21 May 2024.

18 December 2024 [EU] – ESMA technical advice on amendments to CRA regulatory framework concerning ESG factors in credit rating methodologies

ESMA published the final report on the technical advice on revisions to Commission Delegated Regulation (EU) 447/2012 and Annex I of CRA Regulation [available here]. This publication follows up on the consultation launched on 2 April 2024, proposing amendments to such acts in response to a formal request for technical advice received from the European Commission in June 2023 and to the need to update a number of provisions of Commission Delegated Regulation (EU) No 447/2012 to reflect ESMA’s supervisory observations. ESMA’s recommendations will now be submitted to the European Commission for further consideration and potential implementation.

The objective of these amendments is to enhance the incorporation of ESG factors in credit rating methodologies and better disclosure of the relevance of ESG factors to individual credit rating actions, thereby improving the overall reliability and accountability of credit ratings. Specifically, the proposed changes to Delegated Regulation (EU) No. 447/2012, which incorporates feedback from the consultation, would ensure that ESG considerations are thoroughly documented in the credit rating methodologies used by CRAs when these factors are relevant to determining creditworthiness. Conversely, the proposed changes to Annex I of Regulation (EC) No. 1060/2009 are aimed to require CRA to identify prominently in its press releases or reports when ESG considerations are a key element underlying a credit rating or a rating outlook.

19 December 2024 [EU] – Minor amendments to certain language versions of the Climate Delegated Act under the Taxonomy Regulation published in the EU Official Journal

Commission Delegated Regulation (EU) 2024/3215 of 28 June 2024 correcting certain language versions of the Climate Delegated Act (Delegated Regulation (EU) 2021/2139) under the Taxonomy Regulation [available here] was published in the Official Journal. The amendments concern certain references in Annexes I and II of the Croatian, Danish, Dutch, Estonian, Finnish, French, Greek, Hungarian, Irish, Italian, Lithuanian, Polish, Portuguese, Romanian, Slovak, and Spanish language versions of the Climate Delegated Act.

France

10 December 2024 [France] – French AMF publishes an educational report on listed companies’ sustainability reporting

The French Autorité des Marchés Financiers (AMF) has published a report [available here] which provides an overview of the AMF’s reviews of the non-financial statements of listed companies published in 2023 and 2024. This report presents the most frequent or important areas of attention identified in the review of non-financial statements. It covers the following reporting areas: description of the business model; materiality assessment; presentation of targets and performance indicators; presentation of policies and actions; description of governance associated with sustainability issues; and reporting under Article 8 of the Taxonomy Regulation. In addition, the AMF provides a number of examples and regulatory reminders in the report to support companies in their first year of reporting under the CSRD and its European Sustainability Reporting Standards (ESRS).

10 December 2024 [France] – French AMF encourages financial institutions to continue their efforts to improve the transparency of their Taxonomy reporting

The French AMF has published a report [available here] analysing in detail the first reporting of seven banks and insurance companies on the alignment of their activities or exposures with the two climate objectives of the Taxonomy Regulation, namely climate change mitigation and climate change adaptation. It provides an overview of the practices and main challenges encountered by these undertakings to fully comply with the Taxonomy Regulation requirements. In particular, the AMF highlights the importance of providing useful information to investors, including by:

paying particular attention to the transparency of the information provided, in particular by clearly indicating the assumptions made and any difficulties encountered, including the reasons for not publishing certain indicators;
ensuring greater consistency between Taxonomy reporting, the environmental, social and governance strategy and the other components of the non-financial statement to make the disclosures more relevant and useful to investors; and
increasing data availability and reliability.

Italy

13 December 2024 [Italy] – Consob launches a public consultation for certain amendments to the Issuers’ Regulation on sustainable reporting

The Italian Financial Market Authority (Consob) has launched a public consultation concerning certain proposed amendments to its Regulation No. 11971/1999 (“Issuers’ Regulation”) in accordance with the mandate under Legislative Decree no. 125/2024, which transposed the Corporate Sustainability Reporting Directive (CSRD). The proposed changes aim to bring Consob’s secondary legislation in line with the updated EU and national frameworks governing sustainability reporting.

First, Consob would introduce a new article governing the exercise of Consob’s monitoring powers of sustainability reports published by listed issuers having Italy as their home member state. Following the European Securities and Markets Authority’s (ESMA) Guidelines on Enforcement of Financial Information (GLESI), the proposed article establishes that monitoring will be conducted on a sample basis, covering no less than 10% of entities within Consob’s supervisory scope. At least 50% of the sample will be selected using risk parameters defined annually by Consob, while the remainder will be chosen through random selection and to ensure adequate rotation among auditees.

Another significant proposal is the inclusion of practical guidance for preparing sustainability reporting assurances. This guidance outlines the template to be used by financial reporting officers to confirm compliance with sustainability reporting requirements.

Finally, Consob has chosen not to exercise its mandate to adopt transitional principles for the assurance of sustainability reporting. This decision was made in light of the imminent publication of these principles by the Ministry of Economy and Finance (MEF). Feedbacks to the consultation must be submitted to Consob by 13 January [available here, in Italian].

20 December 2024 [Italy] – Consob Highlights Importance of Climate Reporting in Financial Statements

On 20 December 2024, the Italian Financial Market Authority (Consob) published a Call for Attention on climate disclosure reporting in financial statements [available here, in Italian], similar to those issued by other European regulators in view of the imminent entry into force of the sustainability reporting obligations pursuant to Legislative Decree no. 125/2024, which transposed the Corporate Sustainability Reporting Directive (CSRD).

The European Securities and Markets Authority (ESMA) has identified this issue as a supervisory priority since 2021 and reiterated its importance in its 2024 supervisory priorities, emphasising the need for consistency between financial and sustainability reporting on climate risks. It specifically urges issuers, particularly those in climate-sensitive sectors, to disclose in their financial statements and explain any climate risks mentioned in sustainability reports that do not have immediate financial impacts.

To this end, Consob’s in-depth analysis of FTSE-MIB index issuers reveals a gradual adaptation in financial reporting, but highlights several areas needing improvement:

Facilitating investor identification of climate information;
Promoting consistency between financial and sustainability disclosures; and
Providing clear disclosure on the assessment of climate impact.

From 2024, companies must follow new European Sustainability Reporting Standards (ESRS), which include transition plans for climate action. Consob thus advises companies to disclose relevant details about these plans, including their impact on financial estimates and accounting decisions.

The Call for Attention also notes that the description of accounting standards applied is often too general. Issuers should therefore provide detailed financial information on climate issues tailored to their characteristics to help investors better understand the financial impact of climate issues. Finally, Consob stresses the need to disclose the impact of climate factors on the useful life of balance sheet assets, the measurement of expected credit losses, and the valuation of insurance contracts, as well as the assumptions behind these estimates.

Germany

17 December 2024 [Germany] – German federal ministers call for CSRD postponement

Four German federal ministers (for justice, finance, economic affairs, and labor) are calling on the EU Commission to change its approach to the sustainability reporting requirements stipulated by the Corporate Sustainability Reporting Directive (CSRD). In a letter dated 17 December [available here], Volker Wissing (independent), Jörg Kukies (SPD), Robert Habeck (Greens) and Hubertus Heil (SPD) argue that a significant reduction to the requirements laid out by the CSRD is necessary in order to avoid unnecessary burden for businesses. They argue it would be better if the economy had the opportunity to use its resources for the benefit of sustainable growth and innovation in the EU. They state that the German government has launched a bureaucracy reduction initiative but that a significant share of regulatory requirements is enshrined in European law and thus does not fall within the competency of national legislators. The German government fully supports the general goals of promoting an ever stronger and more sustainable European economy, the ministers write. However, they consider the sustainability reporting to be too extensive. Therefore, it should be envisaged, among other things, to postpone the CSRD application deadline by two years to “significantly reduce bureaucracy while enabling corporate responsibility”.

Asset Management

European Union

13 December 2024 [EU] – ESMA releases Q&As on the application of the Guidelines on funds’ names

ESMA has issued a press release [available here; please refer to our newsletter of 21 May 2024 available here] announcing that it has published Q&As in relation to its Guidelines on funds’ names using ESG or sustainability-related terms. The Q&As relate to green bonds, the convergence on “meaningfully investing in sustainable investments” and the definition of controversial weapons.

17 December 2024 [EU] – EU Platform on Sustainable Finance reports on product categorisation under SFDR

The EU Platform on Sustainable Finance has published a report [available here] on the categorisation of products under the SFDR (Regulation (EU) 2019/2088). The Platform strongly supports the creation of a categorisation scheme that benefits retail investors and is usable for all investors and outlines recommendations for the European Commission to implement as part of the SFDR review process. The Platform recommends that products be categorised according to the following sustainability strategies, with each category having precise minimum criteria, clearly defined objectives, and measurable KPIs: sustainable, transition or ESG collection, i.e. excluding significantly harmful investments or activities, investing in assets with better environmental or social criteria or applying various sustainability features. Financial products that do not fall into one of these categories should be identified as unclassified products.

Banking

Italy

6 December 2024 [Italy] – Publication of the Document for Sustainability Dialogue between SMEs and Banks by the Table for Sustainable Finance

The Table for Sustainable Finance, promoted and chaired by the Italian Ministry of Economy and Finance (MEF), and composed of the Ministry of the Environment and Energy Security, the Ministry of Enterprise and Made in Italy, the Bank of Italy, the Italian Financial Market Authority (Consob), the Italian Institute for Insurance Supervision (IVASS) and the Italian Pension Funds Supervisory Authority (COVIP), published the “Document for Sustainability Dialogue between SMEs and Banks” [available here, in Italian].

The Document was shaped at the conclusion of a strongly participatory public consultation process [results available here] and after extensive dialogue between the Sustainable Finance Table, industry experts, and consultants appointed under the Technical Support Instrument (TSI) programme, funded by the European Commission. It aims to support Small and Medium Enterprises (SMEs) in the collection and production of information on ESG impacts, to facilitate dialogue with banks on sustainability issues.

The EU regulatory framework, which has been deeply renewed in the last decade, requires larger listed companies and financial institutions to have clear and reliable information on ESG issues. Unlisted SMEs are not subject to such disclosure requirements, but they are already faced with requests for information on sustainability issues from both large corporate clients and banks and financial intermediaries. The Document aims therefore to offer to such companies, which are usually less organised to collect ESG information, a concrete support to improve their competitive positioning, better assess risks, plan investments, increase resilience to energy and climate shocks, and thus access private financing and public funds and guarantees more easily.

Insurance

European Union

18 December 2024 [EU] – EIOPA and ECB put forward possible EU approach to reduce economic impact of natural catastrophes

EIOPA and the European Central Bank (ECB) have published a joint paper [available here] proposing a potential European system for natural catastrophe risk management scheme to reduce the economic impact of natural catastrophes in the EU. The paper analyses 12 existing national natural catastrophe insurance schemes and how they use private and public funds to fill the protection gap and finds that the existence of such schemes in European countries correlates with higher insurance coverage. On this basis, EIOPA and the ECB propose a possible solution at the EU level, based on two pillars and a multi-layered approach:

an EU public-private reinsurance scheme accessible on a voluntary basis, which would pool private risks across the EU and across perils; and
an EU fund for public disaster financing which would aim at improving public disaster risk management among Member States.

The EIOPA and the ECB note that this proposal is intended as a basis for discussion among stakeholders with a view to contributing to discussions on possible ways to reduce the insurance protection gap while preserving the integrity of national insurance schemes.

19 December 2024 [EU] – EIOPA publishes 2025 annual work programme, including sustainable finance priorities

EIOPA published the final version of its single programming document for the period 2025-2027 [available here], which includes its annual work programme for 2025. In relation to sustainable finance, EIOPA notes that it remains one of its priorities and is present in all areas of EIOPA’s work. This includes embedding ESG in the prudential and conduct frameworks, assessing potential macroprudential implications of ESG risks, promoting sound sustainability reporting and disclosures, and supporting national competent authorities in the supervision of climate-related risks through guidance and discussions in supervisory college meetings.

France

10 December 2024 [France] – ACPR publishes results of 2023-2024 climate stress test on insurers

The French Autorité de contrôle prudentiel et de résolution (ACPR) has published the results of the climate stress test [available here in French language] for which 15 insurance companies voluntarily produced projections by applying hypotheses to test their short-term resilience to physical and transitional hazards and their long-term ability to adapt to worsening climatic and macroeconomic conditions over a 2050 horizon. The ACPR notes that the results of this climate stress test show that insurance companies are significantly exposed to climate-related shocks in both the short and long term, confirming the need for them to integrate climate change into their strategy, governance and, where appropriate, internal models as soon as possible. The ACPR concludes that while insurance companies must continue their efforts to meet their climate change commitments and achieve carbon neutrality by 2050, they must also take steps to manage their assets and liabilities to cope with the expected impact of extreme risks on their claims and financial assets.

Previous editions of the newsletter can be found below: