ESG requirements keep coming; EU investor portal moves forward; Position limits; Europe: update on ECB reporting and MMFR

In the EU, ESMA recently updated its proposed guidelines for fund names using sustainability terms, expected to be approved and published in Q2 2024 (subject to progress on completion of AIFMD and UCITS revised texts to be considered in those guidelines). The guidelines would enter into effect three months later, at which point managers of new funds would be expected to comply with them, and managers of current funds six months after that.

Meanwhile progress has been seen on the European Commission’s proposed regime for ESG ratings providers, with the Council in December having finalized its negotiating position on that proposal, ahead of inter-institutional talks to begin this month of January.

Staying with the EU, the Corporate Sustainability Due Diligence Directive (CSDDD) has taken the next step, with the Parliament and Council reaching a provisional deal on the regime that had been proposed by the Commission in 2022. Notably, the new deal excludes financial services from the scope of the law (although it provides for possible future inclusion after an impact assessment).

In the UK, the FCA recently announced the launch of a voluntary Code of Conduct for ESG Ratings and Data Product Providers produced by the two organizations it appointed for that purpose, the ICMA and the IRSG. Grounded in the recommendations of IOSCO, the Code of Conduct is intended for adoption globally, and its signatories will appear at ICMA’s dedicated web page. The suggested implementation period is 6 months for ESG ratings providers and 12 months for ESG data providers. (Meanwhile on the regulatory front, HM Treasury has yet to announce the result of its consultation on regulating ESG ratings providers which concluded last Summer.)

On a global level, the Task-Force on Climate-Related Disclosures (TCFD) has disbanded, having declared its remit fulfilled and paved the way for the SASB standards which incorporate the TCFD’s recommendations. At the COP28 climate summit which wrapped up in December, the SASB standards (which have just come into effect for reporting periods starting on 1 January 2024) received the support of more than 400 organizations from over 60 jurisdictions.

The ESAP portal is to provide investors with free, centralized access to financial and sustainability information made public by EU companies large and small (no additional reporting obligations are being imposed on them, but they may voluntarily submit additional information for ESAP). While the ESAP Regulation enters into force on 9 January 2024, the portal’s development will take another few years, with ESMA required to establish and operate it by 10 July 2027. In its latest Work Programme, ESMA affirms that in 2024 it will produce technical standards and continue work on the IT infrastructure needed for ESAP. (For a broader look at ESMA’s data strategy, see the five year plan it published last June.)

Existing EU financial laws will incorporate ESAP, according to an accompanying omnibus Directive and Regulation that amend those regimes accordingly. These amendments essentially require that EU Member States and reporting parties ensure that the information reportable under those regimes is also made accessible to the relevant collection bodies for ESAP purposes. This would need to happen by these dates, for the following regimes:

• the Transparency Directive
• the Short Selling Regulation
• the Prospectus Regulation

• the UCITS Directive
• the Benchmarks Regulation
• the Accounting Directive
• the Market Abuse Regulation
• PRIIPs
• SFDR
• the Credit Rating Agencies Regulation
• the EuSEF Regulation
• the EuVECA Regulation
• the PEPP Regulation

• Solvency II
• AIFMD
• MiFID II
• the Insurance Distribution Directive
• IORP II
• the Investment Firms Directive
• the Financial Conglomerates Directive
• the Takeover Directive
• the Audit Directive
• CRD IV
• BRRD
• the Covered Bonds Directive
• MiFIR
• MMFR
• SFTR
• the Audit Regulation
• the Capital Requirements Regulation
• the ELTIF Regulation
• the Green Bond Regulation
• the Investment Firms Regulation
• MiCAR

The ESAP Regulation requires ESMA to enable the portal with functions such as an API, a search tool in all EU languages, downloading of data, and alerts to users when new information appears. These aspects must be implemented according to staggered deadline dates, the last of which is 10 January 2030.

While the ESAP data will be free of charge generally speaking, ESMA will have the right to charge fees for specific services involving high maintenance costs or large volumes of information (with the fee structure being viewable on the ESAP portal).