Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on disclosures relating to sustainable investments and sustainability risks and amending Directive (EU) 2016/2341
Date: 2018-05-24
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: EU environmental policy, consumer information, disclosure of information, economic instrument for the environment, financial market, financial services, green economy, investment, reduction of gas emissions, sustainable development

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   EUROPEAN COMMISSION  Brussels, 24.5.2018 COM(2018) 354 final 2018/0179 (COD)  Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on disclosures relating to sustainable investments and sustainability risks and amending Directive (EU) 2016/2341 (Text with EEA relevance) {SEC(2018) 257 final} - {SWD(2018) 264 final} - {SWD(2018) 265 final}  
 
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

This proposal is part of a broader Commission's initiative on sustainable development. It lays 
the foundation for an EU framework which puts environmental, social and governance (ESG) 
considerations at the heart of the financial system to help transform Europe's economy into a 
greener,  more  resilient  and  circular  system.  ESG  factors  should  be  considered  when  taking 
decisions on investments in order to make investments more sustainable.  

This  proposal  and  the  legislative  acts  proposed  alongside  it  aim  to  integrate  ESG 
considerations into the investment and advisory process in a consistent manner across sectors. 
This  should  ensure  that  financial  market  participants  —  undertakings  for  collective 
investment in transferable securities (UCITS) management companies, alternative investment 
fund  managers  (AIFMs),  insurance  undertakings,  institutions  for  occupational  retirement 
provision  (IORPs),  European  venture  capital  fund  (EuVECA)  managers,  European  social 
entrepreneurship funds (EuSEF) managers and investment firms - that receive a mandate from 
their clients or beneficiaries to take investment decisions on their behalf would integrate ESG 
into their internal processes and inform their clients in this respect. This proposal would also 
ensure that investment firms and insurance intermediaries providing advice consider ESG as 
drivers  of  value  in  the  advice  given  as  part  of  their  duties  towards  investors  and  that  they 
provide  investors  with  the  related  information.  Furthermore,  to  help  investors  compare  the 
carbon  footprint  of  investments,  the  proposals  introduce  new  categories  of  low  carbon  and 
positive carbon impact benchmarks. These proposals, which are mutually reinforcing should 
facilitate investments in sustainable projects and assets across the EU. 

The  Commission’s  package  follows  global  efforts  towards  a  more  sustainable  economy. 
Governments  from  around  the  world  chose  a  more  sustainable  path  for  our  planet  and  our 
economy by adopting the 2016 Paris agreement on climate change and the United Nations 
2030 Agenda for Sustainable Development.  

The  EU  is  committed  to  development  that  meets  the  needs  of  the  present  without 
compromising  the  ability  of  future  generations  to  meet  their  own  needs.  Sustainability  has 
long  been  at  the  heart  of  the  European  project.  The  EU  Treaties  recognise  social  and 
environmental dimensions and that they should be addressed together. 

The  2016  Commission  Communication  on  the  next  steps  for  a  sustainable  European 
future1 links the Sustainable Development Goals (SDGs) of the United Nations 2030 Agenda 
for Sustainable Development to the European policy framework to ensure that all EU actions 
and policy initiatives, within the EU and around the world, take the SDGs on board from the 
outset.  The EU is  also  fully  committed to  reaching  the EU  2030 climate and energy targets 
and  to  mainstreaming  sustainable  development  into  EU  policies,  as  Jean-Claude  Juncker 
announced  in  the  2014  Political  Guidelines  for  the  European  Commission2.  Therefore, 
many of the European Commission’s policy priorities for 2014-2020 feed into the EU climate 
objectives and implement the 2030 Agenda for Sustainable Development. These include the 

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Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic  and  Social  Committee  and  the  Committee  of  the  Regions:  Next  steps  for  a  sustainable 
European future. European action for sustainability (COM(2016) 739 final). 
A  New  Start  for  Europe:  My  Agenda  for  Jobs,  Growth,  Fairness  and  Democratic  Change  -  Political 
Guidelines for the next European Commission, Strasbourg, 15 July 2014. 

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Investment  Plan  for  Europe3,  the  Circular  Economy  Package,  the  Energy  Union 
package, the review of the EU Bioeconomy Strategy4, the Capital Markets Union5 and the 
EU budget for 2014-2020, including the Cohesion fund and research projects. In addition, 
the  Commission  launched  a  multi-stakeholder  platform  to  follow-up  and  exchange  best 
practices on implementing the SDGs. 

Achieving  EU  sustainability  goals  requires  major  investments.  It  is  estimated  that  an 
additional annual investment of EUR 180 billion is needed to meet climate and energy targets 
alone by 2030.6 A substantial part of these financial flows will have to come from the private 
sector.  Closing  this  investment  gap  means  significantly  redirecting  private  capital  flows 
towards more sustainable investments and requires comprehensively rethinking the European 
financial framework. 

In this context, in December 2016 the Commission established a High-Level Expert Group 
to  develop  an  overarching  and  comprehensive  EU  strategy  on  sustainable  finance.  The 
Group’s  report,  published  on  31  January  2018,  provided  a  comprehensive  vision  on 
sustainable finance for Europe and identified two imperatives for Europe's financial system. 
The  first  is  to  improve  the  contribution  of  finance  to  sustainable  and  inclusive  growth.  The 
second  is  to  strengthen  financial  stability  by  incorporating  environmental,  social  and 
governance  factors  into  investment  decision-making.  As  a  follow-up,  on  7  March  2018  the 
Commission published an Action Plan on Financing Sustainable Growth7. 

Financial products, be they investment funds, life insurance or pension products, and portfolio 
management  services  are  provided  to  pool  investors’  capital,  and  invest  that  capital 
collectively  through  a  portfolio  of  financial  instruments  such  as  stock,  bonds  and  other 
securities. While existing rules in Directive 2009/65/EC8, Directive 2009/138/EC9, Directive 
2011/61/EU10,  Directive  2014/65/EU11  and  Directive  (EU)  2016/234112  require  institutional 

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Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic and Social Committee, the Committee of the Regions and the European Investment Bank: An 
Investment Plan for Europe (COM(2014) 0903 final). 
Commission  Staff  Working  Document  on  the  review  of  the  2012  European  Bioeconomy  Strategy 
(SWD(2017) 374 final). 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic and Social Committee and the Committee of the Regions: Action Plan on Building a Capital 
Markets Union (COM(2015)468 final). 
The estimate is a yearly average investment gap for the period 2021 to 2030, based on PRIMES model 
projections used by the European Commission in the Impact Assessment of the Proposal of the Energy 
Efficiency Directive (2016). 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic  and  Social  Committee  and  the  Committee  of  the  Regions:  Action  Plan:  Financing 
Sustainable Growth (COM(2018)097 final). 
Directive  2009/65/EC  of  the  European  Parliament  and  of  the  Council  of  13  July  2009  on  the 
coordination  of  laws,  regulations  and  administrative  provisions  relating  to  undertakings  for  collective 
investment in transferable securities (UCITS) (OJ L 302 17.11.2009, p. 32). 
Directive  2009/138/EC  of  the  European  Parliament  and  of  the  Council  of  25  November  2009  on  the 
taking-up  and  pursuit  of  the  business  of  Insurance  and  Reinsurance  (Solvency  II)  (OJ  L  335, 
17.12.2009, p. 1). 
Directive  2011/61/EU  of  the  European  Parliament  and  of  the  Council  of  8  June  2011  on  Alternative 
Investment  Fund  Managers  and  amending  Directives  2003/41/EC  and  2009/65/EC  and  Regulations 
(EC) No 1060/2009 and (EU) No 1095/2010 (OJ L 174 1.7.2011, p. 1). 
Directive 2014/65/EU  of  the European Parliament  and of  the  Council of 15  May 2014 on  markets  in 
financial  instruments  and  amending  Directive  2002/92/EC  and  Directive  2011/61/EU  (OJ  L  173, 
12.6.2014, p. 349). 
Directive (EU) 2016/2341 of the European Parliament and of the Council of 14 December 2016 on the 
activities  and  supervision  of  institutions  for  occupational  retirement  provision  (IORPs)  (OJ  L  354, 
23.12.2016, p. 37). 

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investors and asset managers to act in the best interest of their clients and provide scope for 
integrating  sustainability  risks,  they  do  not  systematically  consider  and  integrate  them  in  a 
consistent way in their investment decisions and disclosure processes.  

Directive 2009/65/EC and Directive 2011/61/EU are complemented by four fund frameworks:  

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Regulation (EU) No 345/2013 on European venture capital funds13,  
Regulation (EU) No 346/2013 on European social entrepreneurship funds14,  
Regulation (EU) 2015/760 on European long-term investment funds15, and  
Regulation (EU) 2017/1131 on money market funds16. 

The regulatory landscape for financial products is completed by distribution rules, including 
the rules on advice, laid down in Directive 2014/65/EU and Directive (EU) 2016/9717. These 
Directives  require  investment  firms  and  insurance  intermediaries  providing  advice  to  act  in 
the best interest of their clients, but they do not require them to explicitly consider ESG risks 
in their advice nor to disclose those considerations. 

Directive  (EU)  2016/2341  represents  a  first  step  towards  a  more  concise  disclosure 
framework  in  the  financial  services  sector  in  relation  to  ESG  factors.  Directive  (EU) 
2017/82818  on  long-term  shareholder  engagement  increased  the  transparency  obligations  for 
institutional  investors  and  asset  managers  by  requiring  them  to  develop  and  disclose  an 
engagement strategy including a description of how they monitor investee companies on non-
financial  performance,  social  and  environmental  impact  and  corporate  governance,  and  to 
disclose  on  an  annual  basis  how  their  engagement  policy  has  been  implemented. 
Nevertheless,  there  is  still  a  lack  of  transparency  on  how  institutional  investors,  asset 
managers  and  financial  advisors  consider  sustainability  risks  in  their  investment  decision-
making  or  advisory  processes.  As  a  result,  their  clients  do  not  get  the  full  information  they 
need  to  inform  their  investment  decisions  or  recommendations.  In  addition,  undertakings 
subject to Directive 2014/95/EU19 on disclosure of non-financial and diversity information by 
certain large undertakings and groups which amended Directive 2013/34/EU20 on the annual 
financial  statements,  consolidated  financial  statements  and  related  reports  draw  up  non-
financial  statements  about  the  undertakings'  development,  performance,  position  and  impact 
of their activities, relating to inter alia environmental, social and employee matters. 

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Regulation  (EU)  No  345/2013  of  the  European  Parliament  and  of  the  Council  of  17  April  2013  on 
European venture capital funds (OJ L 115, 25.4.2013, p. 1). 
Regulation  (EU)  No  346/2013  of  the  European  Parliament  and  of  the  Council  of  17  April  2013  on 
European social entrepreneurship funds (OJ L 115, 25.4.2013, p. 18). 
Regulation  (EU)  2015/760  of  the  European  Parliament  and  of  the  Council  of  29  April  2015  on 
European long-term investment funds (OJ L 123, 19.5.2015, p. 98). 
Regulation (EU) 2017/1131 of the European Parliament and of the Council of 14 June 2017 on money 
market funds (OJ L 169, 30.6.2017, p. 8). 
Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance 
distribution (OJ L 26, 2.2.2016, p. 19). 
Directive  (EU)  2017/828  of  the  European  Parliament  and  of  the  Council  of  17  May  2017  amending 
Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement (OJ L 132, 
20.5.2017, p. 1). 
Directive  2014/95/EU  of  the  European  Parliament  and  of  the  Council  of  22  October  2014  amending 
Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large 
undertakings and groups (OJ L 330, 15.11.2014, p. 1). 
Directive  2013/34/EU  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on  the  annual 
financial  statements,  consolidated  financial  statements  and  related  reports  of  certain  types  of 
undertakings,  amending  Directive  2006/43/EC  of  the  European  Parliament  and  of  the  Council  and 
repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p.19). 

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• 

Consistency with existing policy provisions in the policy area 

This  proposal  introduces  additional  requirements  to  existing  elements  of  the  relevant 
legislation.  These  new  elements  are  consistent  with  the  objectives  of  the  existing  policy 
provisions in the policy area, and in particular Directive 2009/65/EC, Directive 2009/138/EC, 
Directive  2011/61/EU,  Directive  2014/65/EU,  Directive  (EU)  2016/97,  Directive  (EU) 
2016/2341,  Regulation  (EU)  No  345/2013,  Regulation  (EU)  No  346/2013  and  Regulation 
(EU)  2015/760.  The  proposal  aligns  the  rules  in  the  different  legislative  frameworks  and 
safeguards consistency with them. 

• 

Consistency with other Union policies 

Europe is increasingly faced with the catastrophic and unpredictable consequences of climate 
change  and  resource  depletion.  That  is  why  more  sustainable  economic  growth,  i.e. 
transitioning  to  a  low-carbon,  more  resource-efficient  and  circular  economy,  more 
transparency  and  long-term  thinking  and  planning,  whilst  ensuring  the  stability  of  the 
financial system, is key to the long-term competitiveness of the EU economy. As the financial 
system  has  a  vital  role  to  play  here,  we  must  stimulate  private  capital  in  more  sustainable 
investments. Such thinking is at the core of the Capital Markets Union (CMU)21 project.  

This proposal is complementary to this objective and a priority action in the CMU mid-term 
review  as  it  contains  measures  to  harness  the  transformative  power  of  financial  technology 
and to shift private capital towards sustainable investment. It contributes to the development 
of more integrated capital markets by making it easier for investors to benefit from the single 
market whilst taking informed decisions. 

This proposal is part of a more comprehensive EU package to achieve the EU's climate and 
sustainable  development  agenda  and  feeds  into  the  Union's  energy  and  climate  goals  for 
2014-2020,  such  as  the  Clean  Air  Policy,  the  Circular  Economy  Package,  the  Energy 
Union  Strategy,  including  the  Clean  Energy  for  All  Europeans  Package  and  the  EU 
Strategy on Adaptation to Climate Change. Unlike the other EU initiatives, this proposal 
focuses explicitly on financing aspects by the private sector. It is consistent with the review of 
the  European  System  of  Financial  Supervision22  that  provides  for  amendments  to 
regulations  establishing  the  European  Banking  Authority23,  the  European  Insurance  and 
Occupational  Pensions  Authority24  and  the  European  Securities  and  Markets  Authority25  so 
that  the  Authorities  take  account  of  risks  related  to  environmental,  social  and  governance 
factors when carrying out their tasks. In this way it ensures that financial market activities are 
more  consistent  with  sustainable  objectives.  The  Commission  proposal  on  a  pan-European 

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Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic and Social Committee and the Committee of the Regions: Action Plan on Building a Capital 
Markets Union (COM(2015)468 final). 
Proposal for a Regulation of the European Parliament and of the Council amending Regulations (EU) 
No  1093/2010,  1094/2010,  1095/2010,  345/2013,  346/2013,  600/2014,  2015/760,  2016/1011, 
2017/1129 (COM(2017) 536 final). 
Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 
establishing a European Supervisory Authority (European Banking Authority), amending Decision No 
716/2009/EC and repealing Commission Decision 2009/78/EC (OJ L 331, 15.12.2010, p. 12). 
Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 
establishing  a  European  Supervisory  Authority  (European  Insurance  and  Occupational  Pensions 
Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/79/EC (OJ 
L 331, 15.12.2010, p. 48). 
Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 
establishing a European Supervisory Authority (European Securities and Markets Authority), amending 
Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC (OJ L 331, 15.12.2010, p. 
84). 

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personal  pension  product  (PEPP)  provides  for  several  disclosures  in  relation  to  ESG 
factors26. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

This proposal falls within the area of shared competence in accordance with Article 4(2)(a) of 
the  Treaty  on  the  Functioning  of  the  European  Union  (TFEU)  and  is  based  on  Article  114 
TFEU  which  allows  the  adoption  of  measures  for  the  approximation  of  national  provisions 
having as their object the establishment and functioning of the internal market. 

Disclosures to end-investors reinforce their protection because they aim to better inform their 
investment  choices.  Currently,  end-investors  cannot  reap  the  benefit  of  the  internal  market 
because there is  no dedicated and coherent disclosure framework on the integration of ESG 
risks  by  asset  managers,  including  investment  firms  which  provide  portfolio  management, 
IORPs  and  other  pension  providers,  insurance  undertakings  which  make  available  IBIPs, 
insurance intermediaries and investment firms providing advice. Moreover, end-investors do 
not  currently  receive  coherent  disclosures  by  financial  products  and  services  that  target 
sustainable investments.  

The analysis carried out as part of the impact assessment report suggests that financial market 
participants and financial advisors lack regulatory incentives to disclose to end-investors how 
they integrate sustainability factors in their investment decision process. This, in turn makes it 
more difficult and costly for end-investors to make informed investment choices. Disclosures 
in asset management, insurance and pensions sectors remain unsystematic, incoherent and fail 
to ensure comparability.  

The impact assessment report identified considerable differences among Member States and 
financial  services  sectors.  There  is  also  a  parallel  development  of  market-based  practices 
based on commercially-driven priorities which give rise to divergent outcomes and thus cause 
further  unnecessary  market  fragmentation.  Divergent  disclosure  standards  and  market-based 
practices  make  it  very  difficult  to  compare  different  financial  products  and  services,  create 
unfair conditions for different financial products and services, manufacturers and distribution 
channels, and erect additional barriers to the internal market. Divergences are also confusing 
to  end-investors  and  distort  their  investment  decisions  and  reduce  opportunities  for 
sustainable  investments.  Different  requirements  and  approaches  obstruct  the  fundamental 
freedoms and thus have a direct effect on the functioning of the internal market. Also, in order 
to  respond  to  the  Paris  Climate  Agreement,  as  financial  market  participants  represent  an 
important  driving  force,  Member  States  are  likely  to  adopt  additional  divergent  national 
measures  to  incentivise  more  sustainable  investments.  However,  these  divergent  measures 
could create obstacles to the smooth functioning of the internal market and be detrimental to 
financial  market  participants.  The  disclosure  rules  do  not  regulate  market  access  for  these 
financial  market  participants  and  financial  advisors  but  govern  the  way  their  activities  are 
carried  out.  The  rules  underpin  the  correct  and  safe  functioning  of  the  internal  market, 
safeguard competition between different financial market participants and financial  advisors 
and preserve behavioural incentives for innovation. Consequently, the appropriate legal basis 
is Article 114 TFEU. 

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Commission  Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  on  a  pan-
European Personal Pension Product (PEPP) (COM(2017) 343 final). 

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The taking up of activities as fund managers is regulated by Directive 2009/65/EC, Directive 
2011/61/EU,  Regulation  (EU)  No  345/2013  and  Regulation  (EU)  No  346/2013.  Taking  up 
activity  as  IORPs  is  regulated  by  Directive  (EU)  2016/2341,  as  insurance  undertakings  by 
Directive 2009/138/EC, as providers of portfolio management by Directive 2014/65/EU and 
as  financial  advisors  by  Directive  2014/65/EU  and  Directive  (EU)  2016/97.  These  financial 
market  participants  and  financial  advisors  will  continue  to  be  subject  to  these  frameworks, 
and the disclosure rules they lay down will be supplemented by the disclosure rules contained 
in this new Regulation. 

This  proposal  amends  Directive  (EU)  2016/2341,  which  was  based  on  Articles  53,  62  and 
114(1)  TFEU.  It  empowerments  the  Commission  to  adopt  delegated  acts  specifying  the 
‘prudent person’ rule with respect to the consideration of ESG risks and the inclusion of ESG 
factors  in  internal  investment  decisions  and  risk  management  processes.  Since  general 
governance  and  risk-management  should  already  integrate  ESG  factors  and  risks,  these 
activities should be organised to comply with the delegated acts. As the Commission plans to 
make use of current empowerments under Directive 2009/65/EC, Directive 2009/138/EC and 
Directive  2011/61/EU  to  specify  the  integration  of  ESG  risks  under  those  Directives,  the 
empowerments  under  Directive  (EU)  2016/2341  provide  for  means  to  equally  safeguard 
consumer  protection  and  a  level  playing  field  between  IORPs  and  other  financial  market 
participants.  As  the  proposed  changes  to  Directive  (EU)  2016/2341  concern  rules  related  to 
investment behaviour by IORPs, Article 114 TFEU is the appropriate legal basis. 

• 

Subsidiarity (for non-exclusive competence)  

This proposal complies with the principle of subsidiarity as set out in Article 5 of the Treaty 
on European Union (TEU). 

According to the principle of subsidiarity, Union action may only take place if the envisaged 
aims cannot be achieved by Member States alone. The identified problems are not limited to 
the territory of one Member State. Consequently, the proposal’s aim is to ensure a coordinated 
solution to shortcomings stemming from the current EU legislation covering financial market 
participants  and  financial  advisors.  Uniformity  and  legal  certainty  of  the  exercise  of  the 
Treaty freedoms can be better ensured by taking action at EU level. 

• 

Proportionality 

This proposal complies with the principle of proportionality as set out in Article 5 TEU. The 
proposed  measures  are  necessary  to  achieve  the  objectives  of  transparency  and  reducing 
investors’ search costs to determine how sustainability risks are integrated in the investment 
process by financial market participants and financial advisors. The availability and quality of 
information on this aspect is key element in creating equal conditions by ensuring a coherent 
approach across sectors and Member States. Consultation showed that the costs of considering 
and integrating ESG factors are limited. 

impact  assessment  report  accompanying 

The 
that  Directive 
2009/65/EC, Directive 2009/138/EC, Directive 2011/61/EU, Directive 2014/65/EU, Directive 
(EU) 2016/97, Directive (EU) 2016/2341, Regulation (EU) No 345/2013 and Regulation (EU) 
No  346/2013  do  not  explicitly  consider  and  require  disclosures  on  sustainability.  This 
proposal aims reduce search costs for end-investors on sustainable investments. 

this  proposal  suggests 

Consequently, the proposal does not go beyond what is necessary to tackle the issues at EU 
level. 

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• 

Choice of the instrument 

This  proposal  includes  provisions  which  in  a  coordinated  manner  address  shortcomings  in 
investor  protection  measures  and  guarantee  end-investors  more  legal  certainty.  The  lack  of 
transparency on the integration of sustainability risks and on pursuing sustainable investments 
would  not  be  solved  solely  by  amending  Directive  2009/65/EC,  Directive  2009/138/EC, 
Directive  2011/61/EU,  Directive  2014/65/EU,  Directive  (EU)  2016/97,  Directive  (EU) 
2016/2341,  Regulation  (EU)  No  345/2013  and  Regulation  (EU)  No  346/2013,  as  this  could 
give  rise  to  uneven  implementation.  The  proposal  aims  to  increase  transparency  on  the 
integration of sustainability risks and on the pursuance of sustainable investments. A directly 
applicable  regulation,  providing  full  harmonisation,  is  necessary  to  achieve  these  policy 
objectives  and  is  the  best  way  to  deliver  maximum  harmonisation  between  the  various 
regulatory frameworks while avoiding divergences.  

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Stakeholder consultations 

Responses  to  a  public  consultation  on  long-term  and  sustainable  investment  (18 
December 2015 to 31 March 2016) suggested that the link between the duties of institutional 
investors  and  asset  managers  and  ESG  is  weak  and  that  the  markets  do  not  sufficiently 
integrate ESG risks and do not sufficiently respond to ESG opportunities.  

The High-Level Expert Group on Sustainable Finance (HLEG) was set up in December 2016 
to  help  develop  an  EU  strategy  on  Sustainable  Finance  through  recommendations:  it 
published a HLEG interim report on Financing a Sustainable European Economy in mid-
July  2017  and  presented  the  report  at  a  stakeholder  event  on  18  July  2017,  followed  by  a 
consultation questionnaire. A feedback statement was published along with the HLEG final 
report on Financing a Sustainable European Economy on 31 January 2018. The feedback 
statement summarises the respondents’ replies to the questionnaire. There were certain strong 
trends in all the responses, including  

 

 

 

 

the importance of a clear EU-wide strategy on sustainability; 

the importance of providing a favourable environment for sustainable investment and 
subsequent finance; 

the  need  to  define  institutional  investors’  and  asset  managers’  duties  regarding 
sustainability,  which  could  be  extended  to  embed  wider  environmental,  social  and 
governance considerations; that duty should also include the notion of sustainability; 

the need for improved disclosures. 

The  Commission  received  eight  responses  to  the  inception  impact  assessment  on 
institutional investors and asset managers' duties regarding sustainability (13 November 
2017  to  11  December  2017).  All  of  them  supported  the  Commission’s  work  to  ensure  that 
sustainability  factors  are  assessed,  consistently  taken  into  account  and  disclosed  by 
institutional  investors  and  asset  managers.  Moreover,  they  all  referred  to  issues  such  as 
transparency and disclosure, supervision of ESG integration, clarity of investors' duties in the 
existing EU legislation, comparability and reliability of available data or risk management and 
governance arrangements. 

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The  Commission  further  consulted  stakeholders  through  a  public  consultation  on 
investors’  and  asset  managers’  duties  regarding  sustainability  (13 
institutional 
November 2017 to 29 January 2018). The consultation followed up on the two out of the eight 
recommendations in HLEG interim report and, in particular, sought views on the integration 
of ESG factors by institutional investors and asset managers. The  Commission received 191 
responses to the consultation. 

The  Commission  also  conducted  targeted  interviews  with  stakeholders  (January  to 
February  2018),  i.e.  with  medium-sized/large  asset  managers  and  institutional  investors 
(insurance  companies  and  pension  funds)  that  have  already  integrated  ESG  factors  in  their 
investment decision process and/or have socially responsible investment products. 23 entities 
were  interviewed.  Questionnaires  on  input  and  data  were  used.  The  vast  majority  of 
interviewed entities confirmed the need to clarify at EU level whether institutional investors’ 
and asset managers’ duties involve assessing ESG-related risks and taking them into account 
if  they  are  relevant.  The  interviewed  entities  provided  further  details  on  areas  such  as 
investment strategy, risk management, governance measures (i.e. an ESG specific committee, 
ESG board member, ESG internal control processes), engagement with investees and voting 
policy.  Some  entities  also  mentioned  that  they  have  in  place  separate  ESG  policies,  must 
report  to  an  ESG  committee  and  to  their  board  and  that  their  remuneration  policies  were 
aligned with ESG. Asset managers mentioned that the benefits of integrating ESG included its 
positive  impact  on  financial  performance  (particularly  over  the  long  term),  improved 
risk/return  characteristics  of  the  portfolio  they  manage,  reputational  benefits  of  ESG 
integration,  and  ability  to  attract  new  clients.  Insurers  and  pension  providers  mentioned  an 
increase  in  demand  by  investors.  Most  of  the  interviewed  entities  disclose  ESG-related  at 
entity level and in annual/periodic reports, while others have client-specific disclosure, which 
is not public. A few entities have started to make public ESG disclosure at product level. 

In  addition,  on  18  July  2017,  the  Commission  organised  a  conference  on  the  ‘Sustainable 
Finance: Interim  Report’.  Approximately  450  representatives  had  the  opportunity  to  discuss 
the  HLEG  interim  report  and  to  provide  feedback.  The  Commission  also  organised  a  high-
level  conference  on  ‘Financing  sustainable  growth’  on  22  March  2018  to  keep  up  the 
momentum  with  the  One  Planet  Summit  and  continue  to  consolidate  the  support  and 
commitment from EU leaders and key private players for the changes needed in the financial 
system to fund the transition towards a low-carbon economy. 

• 

Collection and use of expertise 

The  Commission  relied  on  several  studies,  information  and  data  sources  from  the  United 
Nations Environment Programme, the OECD, the HLEG, Eurosif, academia, think tanks, the 
European  Fund  and  Asset  Management  Association,  market  reports  and  studies  by  private 
companies.  The  process  also  drew  on  a  Commission  study  on  Resource  Efficiency  and 
Fiduciary Duties of Investors published in 2015. The Commission also relied on experience 
with  two  Horizon  2020  projects  related  to  sustainable  finance,  i.e.  a  project  on  developing 
sustainable  energy  investment  (SEI)  metrics,  benchmarks,  and  assessment  tools  for  the 
financial sector and a project on energy transition risks and opportunities. 

• 

Impact assessment 

An impact assessment was carried out to prepare this initiative.  

The proposal takes into account the opinions (the positive opinion with reservations issued on 
14  May  2018  and  the  previous  two  negative  opinions)  issued  by  the  Regulatory  Scrutiny 
Board (RSB). The proposal and revised impact assessment address the comments of the RSB, 

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which concluded in their opinions that adjustments were necessary before proceeding further 
with this initiative. The Board’s major concerns were about the costs related to the disclosure 
requirements,  both  for  smaller  issuers  and  for  relevant  financial  entities.  Consequently,  the 
policy options in the impact assessment report reflect the Board’s concerns by:  

(a) 

(b) 

(c) 

clarifying  the  disclosures  in  relation  to  the  integration  of  sustainability  risks  and 
disclosure  requirements  of  financial  products  or  services  pursuing  sustainable 
investments; 

identifying incentives for financial market participants and financial advisors to cut 
the costs which may be borne by investee companies, namely to use information in 
management  reports  or  non-financial  statements  in  accordance  with  Directive 
2013/34/EU; 

providing  for  examples  of  situations  where  the  information  and  data  may  not  be 
directly  available  on the  market  or  the  available  data  may  be  of  low  quality  and/or 
not comparable; 

(d) 

improving the presentation of the cost-benefit trade-offs.  

In general terms, the policy choices assessed in the impact assessment are as follows: 

(a) 

(b) 

(c) 

(d) 

explicitly  requiring  the  integration  of  ESG  risks  in  the  investment  decision  or 
advisory processes as part of duties towards investors and/or beneficiaries; 

introducing  mandatory  disclosures  at  the  level  of  the  financial  market  participants 
and  financial  advisors  on  how  ESG  risks  are  integrated  in  the  investment  decision 
and advisory process; 

introducing  mandatory  disclosures  for  the  given  financial  product  or  service,  on 
integrating ESG risks in the investment decision or advisory process; 

in  addition,  where  financial  market  participants  and  financial  advisors  market 
financial products or services claim that such products or services pursue sustainable 
investment  objectives,  obliging  them  to  disclose  information  on  the  contribution  of 
the investment decisions to the sustainable investment objectives (ex-post disclosure 
in  regular  reporting)  and  on  how  the  investment  strategy  is  aligned  with  the 
sustainable 
in  pre-contractual  and 
contractual documents).  

investment  objectives  (ex-ante  disclosure 

This Regulation covers policy choices (a), (b), (c) and (d). Policy choice (a) is covered by the 
amendment to Directive (EU) 2016/2341 introducing empowerments for the Commission to 
adopt respective delegated acts. 

Feedback  received  from  stakeholders  showed  that  a  clear  and  coherent  approach  on 
integration  of  ESG  risks  would  have  the  following  economic  impacts.  First  of  all,  end-
investors  will  have  more  information  on  how  financial  market  participants  and  financial 
advisors integrate ESG risks in their investment decision-making or advisory processes. ESG 
risks  would be  more  systematically  taken  into  account  in  financial  modelling,  leading  to  an 
optimal  risk-return  trade-off  at  least  in  the  long-term,  thereby  fostering  market  efficiency. 
This  will  encourage  financial  market  participants  and  financial  advisors  to  be  innovative  in 
investment strategies or in their recommendations due to the consideration of a wider range of 
factors, both financial and non-financial, creating the conditions to attract new investors. And 
it will ultimately increase competition, incentivising entities to adopt high ESG standards. 

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Feedback  from  stakeholders  also  indicated  that  ESG-related  costs  are  part  of  the  overall 
internal  and  organisational  costs  related  to  the  risk  management  and  monitoring  of  certain 
exposures. In fact, the additional tasks imposed on financial market participants and financial 
advisors  covered  by  this  initiative  would  be  incorporated  within  the  existing  organisational 
and operating procedures. 

Mandatory  disclosures  will  increase  overall  transparency,  by  reducing  the  asymmetry  of 
information  between  end-investors  and  financial  entities.  The  granularity  of  available 
information  to  end-investors  will  increase.  Information  will  be  effective  in  reaching  the 
market, and better serve the general objective of reducing search costs for end-investors.  

Some stakeholders indicated that the most significant costs would come from reviewing the 
pre-contractual  and  contractual  documents  (e.g.  about  EUR  40  000  per  prospectus,  which 
would  be  a  one-off  cost).  However,  these  costs  are  expected  to  be  limited  if  there  is  a 
transitional period, as suggested under the preferred option. Moreover, they indicated that the 
prospectus has to be periodically revised in any event; hence, the cost of adding ESG related 
information should be a fraction of it. Moreover, there are reputational benefits for financial 
entities  from  disclosure,  as  well  as  reduced  costs  for  end-investors  in  finding  financial 
products  and/or  services  and  taking  investment  decisions  that  correspond  to  their 
sustainability preferences. 

The  combination  of  a  more  competitive  and  efficient  market  in  ESG  products  and  services 
and the growing demand from end-investors for them, helped by the reduction in search costs, 
should ultimately cause this market to grow. 

• 

Fundamental rights 

The proposal promotes rights enshrined in the Charter of Fundamental Rights (the ‘Charter’). 
It has an impact on the integration of a high level of environmental protection (Article 37 of 
the Charter) and various social rights (such as Articles 25 and 26 of the Charter) as well as 
social cohesion (Article 36 of the Charter) since its main objective is to foster the integration 
of  sustainability  factors  by  institutional  investors  and  asset  managers  and  provide  for  a 
disclosure  framework  as  regards  the  integration  and  impacts  of  investments  on  the  real 
economy and their ability to stimulate and provide for the right incentives for transitioning to 
a green, low-carbon and resource-efficient economy. 

4. 

BUDGETARY IMPLICATIONS 

The proposal does not have a budgetary impact for the Commission. 

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

An evaluation of this Regulation will be conducted at the latest 60 months after its entry into 
force.  

• 

Detailed explanation of the specific provisions of the proposal 

Article  1  lays  down  the  subject  matter  of  the  Regulation,  namely  the  transparency 
requirements  of  financial  market  participants,  insurance  intermediaries  which  provide 
insurance  advice  on  insurance-based  investment  products  (‘IBIPs’)  and  investment  firms 
which provide investment advice (financial advisors), on the integration of sustainability risks 
in  their  investment  decision-making  processes  or,  where  relevant,  advisory  processes  and 

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transparency  as  regards  financial  products  which  target  sustainable  investments,  including 
reduction in carbon emissions. 

Article 2 sets out  terms and definitions that  are used  for the purposes of this Regulation, in 
particular  ‘financial  market  participant’,  ‘financial  product’,  ‘sustainable  investments’  and 
others.  In  particular,  ‘financial  market  participant’  means  an  insurance  undertaking  which 
makes  available  an  IBIP,  a  manager  of  an  alternative  investment  fund  (‘AIFM’),  an 
investment  firm  which  provides  portfolio  management,  an  institution  for  occupational 
retirement provision (‘IORP’), or a UCITS management company, a manager of a qualifying 
venture  capital  fund  or  a  qualifying  social  entrepreneurship  fund.  Since  under  Regulation 
(EU) 2015/76027, European long-term investment funds (‘ELTIFs’) may only be managed by 
AIFMs, AIFMs managing ELTIFs fall under the definition of financial market participant and 
are thus obliged to meet the transparency requirements under this Regulation with regard to 
ELTIFs. In order to include group life insurance policies with investment components in the 
scope of this Regulation, for the purposes of this Regulation IBIPs include IBIPs as defined in 
Article  4(2)  of  Regulation  (EU)  No  1286/201428  as  well  as  insurance  investment  products 
made available to professional investors.  

Under  Article  3  financial  market  participants  are  required  to  publish  written  policies  on  the 
integration of sustainability risks in investment decision making process. The financial market 
participants  are  required  to  publish  them  on  their  websites  and  maintain  the  policies  up-to-
date. This obligation also extends to financial advisors. 

Article  4  lays  down  that  financial  market  participants  must  include  in  pre-contractual 
disclosures  information  on  how  financial  market  participants  and  financial  advisors 
incorporate  sustainability  risks.  This  is  in  addition  to  what  is  already  required  under 
applicable  sectorial  rules  (Directive  2009/65/EC,  Directive  2009/138/EC,  Directive 
2011/61/EU,  Directive  2014/65/EU,  Directive  (EU)  2016/97,  Directive  (EU)  2016/2341, 
Regulation  (EU)  No 345/2013  and  Regulation  (EU)  No 346/2013).  Financial  market 
participants are required to provide descriptions of the procedures and conditions applied for 
integrating sustainability risks in investment decisions, the extent to which sustainability risks 
are expected to have an impact on the returns of the financial products offered and how the 
remuneration  policies  of  financial  market  participants  take  into  account  the  integration  of 
sustainability  risks  and  sustainable  investments.  The  same  obligations,  adapted  to  fit  the 
advisory process, are imposed on financial advisors. 

Article  5  sets  out  pre-contractual  transparency  rules  on  sustainable  investments.  Financial 
market  participants  are  required  to  include  information  on  how  the  target  of  sustainable 
investments is ensured, i.e. whether an index has been designated as a reference benchmark 
and an explanation as to why the weighting and constituents of the benchmark differ from a 
broad market index. Managers of qualifying social entrepreneurship funds  making available 
information  on  the  positive  social  impact  targeted  by  a  given  fund  in  accordance  with  the 
methodologies  under  Regulation  (EU)  No  346/2013,  may  use  this  information  for  the 
purposes of Article 5. Article 5 lays down specific disclosure rules for financial products that 
target  the  reduction  in  carbon  emissions.  To  standardise  and  streamline  the  pre-contractual 
disclosures,  this  Article  empowers  the  Commission  to  adopt  regulatory  technical  standards. 
Draft regulatory technical standards should be jointly developed, through the Joint Committee 
of  the  European  Supervisory  Authorities  (‘Joint  Committee’),  by  the  European  Banking 

27 

28 

Regulation  (EU)  2015/760  of  the  European  Parliament  and  of  the  Council  of  29  April  2015  on 
European long-term investment funds (OJ L 123, 19.5.2015, p. 98). 
Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 
on  key  information  documents  for  packaged  retail  and  insurance-based  investment  products  (PRIIPs) 
(OJ L 352, 9.12.2014, p. 1). 

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Authority (‘EBA’), the European Insurance and Occupational Pensions Authority (‘EIOPA’) 
and the European Securities and Markets Authority (‘ESMA’). 

Article  6  introduces  a  requirement  for  financial  market  participants  to  publish  on  their 
websites next to the information to be provided in accordance with Article 5 and Article 7, a 
description  of  the  sustainable  investments  target,  information  on  the  methodologies  used  to 
assess, evaluate and monitor the effectiveness of investments. To standardise and streamline 
the pre-contractual disclosures, this Article also provides for an empowerment for regulatory 
technical standards. Draft regulatory technical standards should be developed, jointly through 
the Joint Committee, by the EBA, the EIOPA and the ESMA. 

Since  the  current  disclosure  requirements  set  out  by  EU  legislation  do  not  provide  all  the 
information necessary to properly inform end-investors about the sustainability-related impact 
of  their  investments,  financial  market  participants  are  therefore  required  under  Article  7  to 
describe  in  periodical  reports  the  specification  of  the  impacts  of  sustainable  investments  by 
means  of  relevant  sustainability  indicators.  Managers  of  qualifying  social  entrepreneurship 
funds  making  available  information  on  the  overall  social  outcome  achieved  and  the  related 
methods used in accordance with Regulation (EU) No 346/2013 may use this information for 
the  purposes  of  Article  7.  Where  an  index  has  been  designated  as  a  reference  benchmark, 
financial  market  participants  are  also  required  to  include  a  comparison  where  an  index  has 
been  designated  as  a  reference  benchmark,  between  the  impacts  of  the  portfolio  with  the 
benchmark,  and  a  broad  market  index  in  terms  of  weighting,  constituents  and  sustainability 
indicators. The descriptions should be added to the reporting obligations on financial market 
participants  laid  down  by  Directive  2009/65/EC,  Directive  2011/61/EU,  Directive  (EU) 
2016/2341,  Regulation  (EU)  No  345/2013  and  Regulation  (EU)  No  346/2013.  As  regards 
insurance-based investment products, Directive 2009/138/EC lays down no annual reporting 
obligations  on  insurance  undertakings.  Therefore,  Article  7  ensures  that  the  respective 
disclosures  are  made  available  annually  and  in  accordance  with  Article  185(6)  of  Directive 
2009/138/EC, i.e. in writing, and in an official language as determined in accordance with that 
Directive. Article 7 also ensures that investment firms which provide portfolio management 
disclose  the  information  in  the  periodical  reports  referred  to  in  Article  25(6)  of  Directive 
2014/65/EU.  To  meet  the  disclosure  requirements,  financial  market  participants  may  use 
information in management reports in accordance with Article 19 or non-financial statements 
in  accordance  with  Article  19a  of  Directive  2013/34/EU.  To  standardise  and  streamline  the 
disclosures, this Article also lays down an empowerment  for regulatory  technical standards. 
Draft regulatory technical standards should be developed jointly through the Joint Committee, 
by the EBA, the EIOPA and the ESMA. 

Under Article 8 financial market  participants and financial advisors must ensure that all the 
information  published  on  their  websites  is  kept  up-to-date,  including  a  clear  explanation  of 
any amendments to the published information. 

Under  Article  9  financial  market  participants  and  financial  advisors  must  ensure  that 
marketing  communications  do  not  contradict  the  information  disclosed  pursuant  to  this 
Regulation  unless  sectoral  legislation,  in  particular  Directive  2009/65/EC,  Directive 
2014/65/EU, Directive (EU) 2016/97 and Regulation (EU) No 1286/2014 provide for stricter 
rules.  Article  9  also  empowers  the  Commission  to  implement  technical  standards.  Draft 
implementing  technical standards  should  be  developed  jointly  through  the  Joint  Committee, 
by the EBA, the EIOPA and the ESMA. 

Article 10 amends Directive (EU) 2016/2341. The amendment empowers the Commission to 
specify  in  delegated  acts,  in  accordance  with  Article  290  TFEU,  the  ‘prudent  person’  rule 
with  respect  to  the  consideration  of  environmental,  social  and  governance  risks  and  the 

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inclusion of environmental, social and governance factors in internal investment decisions and 
risk  management  processes.  Since  governance  and  risk-management  rules  under  Directive 
(EU)  2016/2341  already  apply  to  investment  decisions  and  risks  assessments,  including 
environmental, social and governance considerations, the activities and underlying processes 
of  IORPs  should  be  informed  to  comply  with  the  delegated  acts.  The  delegated  acts  should 
ensure consistency, where relevant, with delegated acts adopted under Directive 2009/65/EC, 
Directive 2009/138/EC and Directive 2011/61/EU. 

Article  11  lays  down  that  an  evaluation  of  the  application  of  this  Regulation  must  be 
conducted at the latest 60 months after it enters into force. 

Under  Article  12,  this  Regulation  should  apply  12  months  following  its  publication  in  the 
Official  Journal  of  the  European  Union.  However,  the  empowerments  laid  down  in  Article 
5(5), Article 6(2), Article 7(4), Article 9(2) and Article 10 apply from the date this Regulation 
enters into force. Also, to ensure the first annual reports containing information in accordance 
with Article 7(1) to (3) relate to the complete calendar year, the application of Article 7(1) to 
(3)  is  deferred  to  January  1  of  the  year  following  the  date  referred  to  in  the  second 
subparagraph of this Article. 

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2018/0179 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on disclosures relating to sustainable investments and sustainability risks and amending 
Directive (EU) 2016/2341 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 114 thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 
Having regard to the opinion of the European Central Bank29, 
Having regard to the opinion of the European Economic and Social Committee30, 

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

29 
30 
31 

32 

33 

34 

35 

The  transition  to  a  low-carbon,  more  sustainable,  resource-efficient  and  circular 
economy is key to ensuring long-term competitiveness of the economy of the Union. 
The Paris Climate Agreement (COP21) as ratified by the Union on 5 October 201631 
and  entered  into  force  on  4  November  2016,  seeks  to  strengthen  the  response  to 
climate  change,  among  other  means,  by  making  finance  flows  consistent  with  a 
pathway towards low greenhouse gas emissions and climate-resilient development. 

A common objective of Directive 2009/65/EC of the European Parliament and of the 
Council32,  Directive  2009/138/EC  of  the  European  Parliament  and  of  the  Council33, 
Directive  2011/61/EU  of  the  European  Parliament  and  of  the  Council34,  Directive 
2014/65/EU of the European Parliament and of the Council35, Directive (EU) 2016/97 

OJ C , , p. . 
OJ C , , p. . 
Council  Decision  (EU)  2016/1841  of  5  October  2016  on  the  conclusion,  on  behalf  of  the  European 
Union, of  the Paris Agreement  adopted under  the United  Nations  Framework  Convention on  Climate 
Change (OJ L 282, 19.10.2016, p. 1). 
Directive  2009/65/EC  of  the  European  Parliament  and  of  the  Council  of  13  July  2009  on  the 
coordination  of  laws,  regulations  and  administrative  provisions  relating  to  undertakings  for  collective 
investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, p. 32). 
Directive  2009/138/EC  of  the  European  Parliament  and  of  the  Council  of  25  November  2009  on  the 
taking-up  and  pursuit  of  the  business  of  Insurance  and  Reinsurance  (Solvency  II)  (OJ  L  335, 
17.12.2009, p. 1). 
Directive  2011/61/EU  of  the  European  Parliament  and  of  the  Council  of  8  June  2011  on  Alternative 
Investment Fund Managers (OJ L 174, 1.7.2011, p. 1). 
Directive 2014/65/EU  of  the European Parliament  and  of  the  Council of 15  May 2014 on  markets  in 
financial  instruments  and  amending  Directive  2002/92/EC  and  Directive  2011/61/EU  (OJ  L  173, 
12.6.2014, p. 349). 

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of  the  European  Parliament  and  of  the  Council36,  Directive  (EU)  2016/2341  of  the 
European  Parliament  and  of  the  Council37,  Regulation  (EU)  No  345/2013  of  the 
European  Parliament  and  of  the  Council38  and  Regulation  (EU)  No  346/2013  of  the 
European Parliament and of the Council39 is to facilitate the taking-up and pursuit of 
the  activities  of  undertakings  for  collective  investment  in  transferable  securities 
(UCITS),  alternative  investment  fund  managers  (AIFMs),  insurance  undertakings, 
investment  firms,  insurance  intermediaries,  institutions  for  occupational  retirement 
provision  (IORPs),  managers  of  qualifying  venture  capital  funds  (EuVECA 
managers),  and  managers  of  qualifying  social  entrepreneurship  funds  (EuSEF 
managers). Those Directives and Regulations ensure more uniform protection of end-
investors  and  make  it  easier  for  them  to  benefit  from  a  wide  range  of  financial 
products and services, and at the same time provide for rules that enable investors to 
make  informed  investment  decisions.  While  those  objectives  have  been  largely 
achieved,  disclosures  to  end-investors  on  the  integration  of  sustainability  risks  and 
sustainable investment targets in investment decision-making by UCITS management 
companies, AIFMs, insurance undertakings, investment firms which provide portfolio 
management,  IORPs,  pension  providers,  EuVECA  managers  and  EuSEF  managers 
(financial  market  participants)  and  disclosures  to  end-investors  on  the  integration  of 
sustainability  risks  in  advisory  processes  by  insurance  intermediaries  which  provide 
insurance  advice  with  regard  to  insurance-based  investment  products  (IBIPs)  and 
investment  firms  which  provide 
investment  advice  (financial  advisors)  are 
insufficiently  developed  because  such  disclosures  are  not  yet  subject  to  harmonised 
requirements. 

In the absence of harmonised Union rules on sustainability-related disclosures to end-
investors,  it  is  likely  that  diverging  measures  will  continue  to  be adopted  at  national 
level  and  different  approaches  in  different  financial  services  sectors  might  persist. 
Such  divergent  measures  and  approaches  would  continue  to  cause  significant 
distortions  of  competition  resulting  from  significant  differences  in  disclosure 
standards.  In  addition,  a  parallel  development  of  market-based  practices,  based  on 
commercially-driven  priorities that produce divergent results currently causes  further 
market fragmentation and might even further exacerbate the functioning of the internal 
market in the future. Divergent disclosure standards and market-based practices make 
it  very  difficult  to  compare  between  different  financial  products  and  services  and 
create  an  uneven  playing  field  between  these  products  and  services  and  between 
distribution  channels,  and  erect  additional  barriers  to  the  internal  market.  Such 
divergences  can  also  be  confusing  for  end-investors  and  can  distort  their  investment 
decisions. In ensuring compliance with the Paris Climate Agreement,  Member States 
are  likely  to  adopt  divergent  national  measures  which  could  create  obstacles  to  the 
smooth  functioning  of  the  internal  market  and  be  detrimental  to  financial  market 
participants and financial advisors. In addition, the lack of harmonised rules relating to 
transparency  makes  it  difficult  for  end-investors  to  effectively  compare  different 
financial products and services in different Member States as to their environmental, 

(3) 

36 

37 

38 

39 

Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance 
distribution (OJ L 26, 2.2.2016, p. 19). 
Directive (EU) 2016/2341 of the European Parliament and of the Council of 14 December 2016 on the 
activities  and  supervision  of  institutions  for  occupational  retirement  provision  (IORPs)  (OJ  L  354, 
23.12.2016, p. 37). 
Regulation  (EU)  No  345/2013  of  the  European  Parliament  and  of  the  Council  of  17  April  2013  on 
European venture capital funds (OJ L 115, 25.4.2013, p. 1). 
Regulation  (EU)  No  346/2013  of  the  European  Parliament  and  of  the  Council  of  17  April  2013  on 
European social entrepreneurship funds (OJ L 115, 25.4.2013, p. 18). 

EN 

15 

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(4) 

(5) 

(6) 

social  and  governance  risks  and  sustainable  investment  targets.  It  is  therefore 
necessary to address existing to the functioning of the internal market  and to prevent 
likely future obstacles. 

To ensure a coherent application of this Regulation and that the disclosure obligations 
laid down in this Regulation are clearly and  consistently applied by financial market 
participants,  it  is  necessary  to  lay  down  a  harmonised  definition  of  ‘sustainable 
investments’. 

Remuneration  policies  of  financial  market  participants  and  financial  advisors  should 
be  consistent  with  the  integration  of  sustainability  risks  and,  where  relevant, 
sustainable  investment  targets  and  should  be  designed  to  contribute  to  long-term 
sustainable  growth.  Pre-contractual  disclosures  should  therefore  include  information 
on how the remuneration policies of those entities are consistent with the integration 
of sustainability risks and are in line, where relevant, with the sustainable investment 
targets  of  the  financial  products  and  services  that  the  financial  market  participants 
make available or financial advisors advise on. 

financial  market  participants  should  also 

Since  sustainability  benchmarks  serve  as  standard  points  of  reference  against  which 
sustainable investments are measured, end-investors should be informed by means of 
pre-contractual disclosures about the appropriateness of the designated index, namely 
the  alignment  of  that  index  with  the  sustainable  investment  target.  Financial  market 
participants should also disclose the reasons for different weighting and constituents of 
the  designated  index  compared  to  a  broad  market  index.  To  further  foster 
the 
transparency, 
methodology  used  for  the  calculation  of  the  designated  index  and  the  broad  market 
index is to be found, so that end-investors have the necessary information on how the 
underlying  assets  of  the  indexes  were  selected  and  weighted,  which  assets  were 
excluded  and  for  what  reason,  how  sustainability-related  impacts  of  the  underlying 
assets were measured, or which data sources were used. Such disclosures should allow 
for effective comparison and contribute to develop a correct perception of sustainably-
friendly investments. Where no index  has  been designated as  a reference  benchmark 
financial  market  participants  should  explain  how  the  sustainable  investment  target  is 
reached. 

indicate  where 

(7)  Where  a  financial  product  or  service  targets  a  reduction  in  carbon  emissions,  pre-
contractual disclosures should include the targeted low carbon emission exposure. In 
situations where no Union harmonised carbon benchmark is available, the disclosures 
should include a detailed explanation of how the continued adherence to that target is 
ensured. 

(8) 

(9) 

To  enhance  transparency  and  inform  end-investors,  access  to  information  on  how 
sustainability  risks  are  integrated  by  financial  market  participants  in  the  investment 
decision making processes and by financial advisors in advisory processes should be 
regulated by requiring those entities to maintain that information on their websites. 

The current disclosure requirements set out by Union legislation do not provide that all 
the  information  necessary  to  properly  inform  end-investors  about  the  sustainability-
related  impact  of  their  investments  must  be  disclosed.  Therefore,  it  is  appropriate  to 
set out more specific disclosure requirements with regard to sustainable investments. 
For instance, the overall sustainability-related impact of financial products should be 
reported  regularly  by  means  of  indicators  relevant  for  the  chosen  sustainable 
investment  target.  Where  an  appropriate  index  has  been  designated  as  reference 
benchmark that information should also be provided for the designated index and to a 

EN 

16 

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broad  market  index  to  allow  for  comparison.  Information  on  the  constituents  of  the 
designated  index  and  of  the  broad  market  index  along  with  their  weightings  should 
also  be  disclosed, to  provide  further  information  on  how  the  sustainable  investments 
targets  are  achieved.  Where  EuSEF  managers  make  available  information  on  the 
positive  social  impact  targeted  by  a  given  fund,  the  overall  social  outcome  achieved 
and the related methods used in accordance with Regulation (EU) No 346/2013, they 
may, where appropriate, use this information for the purposes of the disclosures under 
this Regulation. 

(10)  Directive  2013/34/EU  of  the  European  Parliament  and  of  the  Council40  impose 
transparency  obligations  as  regards  social,  environmental  and  corporate  governance 
aspects in non-financial reporting. The required form and presentation established by 
those  Directives  is  not,  however,  suitable  for  direct  use  by  financial  market 
participants  and  financial  advisors  when  dealing  with  end-investors.  The  financial 
market participants and financial advisors should have the option to use information in 
management  reports  and  non-financial  statements  in  accordance  with  Directive 
2013/34/EU for the purposes of this Regulation, where appropriate. 

(11)  To ensure the reliability of information published on financial market participants' and 
financial  advisors'  websites,  that  information  should  be  kept  up-to-date,  and  any 
review or change should be clearly explained.  

(12) 

In order to specify how IORPs make investment decisions and assess risks in order to 
take into account environmental, social and governance risks, the power to adopt acts 
in  accordance  with  Article  290  of  the  Treaty  on  the  Functioning  of  the  European 
Union  should  be  delegated  to  the  Commission  in  Directive  (EU)  2016/2341. 
Governance and risk-management rules already apply to the investment decisions and 
the risks assessments in order to ensure continuity and regularity in the performance of 
IORPs  activities.  The  investment  decisions  and  the  assessment  of  relevant  risks, 
including  environmental,  social  and  governance  risks,  should  be  made  in  such  a 
manner as to ensure compliance with the interests of members and beneficiaries. The 
activities  and  underlying  processes  of  IORPs  should  ensure  that  the  aim  of  the 
delegated  acts  is  achieved.  The  delegated  acts  should  ensure  consistency,  where 
relevant,  with  delegated  acts  adopted  under  Directive  2009/65/EC,  Directive 
2009/138/EC  and  Directive  2011/61/EU.  It  is  of  particular  importance  that  the 
Commission carry out appropriate consultations during its preparatory work, including 
at  expert  level,  and  that  those  consultations  be  conducted  in  accordance  with  the 
principles laid down in the Interinstitutional Agreement on Better Law-Making of 13 
April 2016. In particular, to ensure equal participation in the preparation of delegated 
acts,  the  European  Parliament  and  the  Council  should  receive  all  documents  at  the 
same  time  as  Member  States’  experts,  and  their  experts  should  systematically  have 
access  to  meetings  of  Commission  expert  groups  dealing  with  the  preparation  of 
delegated acts.  

(13)  The  European  Banking  Authority  (‘EBA’),  European  Insurance  and  Occupational 
Pensions  Authority  (‘EIOPA’)  and  the  European  Securities  and  Markets  Authority 
(‘ESMA’)  (collectively  known  as  the  ‘ESAs’)  established  by  Regulation  (EU)  No 

40 

Directive  2013/34/EU  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on  the  annual 
financial  statements,  consolidated  financial  statements  and  related  reports  of  certain  types  of 
undertakings,  amending  Directive  2006/43/EC  of  the  European  Parliament  and  of  the  Council  and 
repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19). 

EN 

17 

  EN 

 
                                                 
1093/2010  of  the  European  Parliament  and  of  the  Council,41  Regulation  (EU)  No 
1094/2010 of the European Parliament and of the Council42 and Regulation (EU) No 
1095/2010  of  the  European  Parliament  and  of  the  Council43  respectively  should, 
through the Joint Committee, develop regulatory technical standards further specifying 
the  details  of  the  presentation  and  content  of  the  information  on  sustainability 
investment targets to be disclosed in pre-contractual documents, periodical reports and 
websites  of  financial  market  participants  in  accordance  with  Articles  10  to  14  of 
Regulation  No  1093/2010,  Regulation  No  1094/2010  and  of  Regulation  (EU)  No 
1095/2010. The Commission should be empowered to adopt those regulatory technical 
standards. 

(14)  The  Commission  should  be  empowered  to  adopt  implementing  technical  standards 
developed by the ESAs through the Joint Committee, by means of implementing acts 
pursuant to Article 291 TFEU and in accordance with Article 15 of Regulation (EU) 
No  1093/2010,  Article  15  of  Regulation  (EU)  No  1094/2010  and  Article  15  of 
Regulation  (EU)  No  1095/2010,  to  establish  the  standard  presentation  of  sustainable 
investments in marketing communication. 

(15)  Since periodical reports in principle summarize business results for complete calendar 
years,  the  application  of  the  provisions  on  transparency  requirements  in  periodical 
reports should be deferred to [PO: Please insert 1st January of the year following the 
date referred to in the second subparagraph of Article 12].  

(16)  The disclosure rules contained in this Regulation should supplement, and should apply 
in  addition  to,  the  provisions  of  Directive  2009/65/EC,  Directive  2009/138/EC, 
Directive  2011/61/EU, Directive  (EU) 2016/2341  of the European Parliament and of 
the Council,44 Regulation (EU) No 345/2013 and Regulation (EU) No 346/2013.  

(17)  This Regulation respects fundamental rights and observes the principles recognised in 

particular by the Charter of the Fundamental Rights of the European Union. 

(18)  Since  the  objectives  of  this  Regulation,  namely  to  strengthen  protection  for  end- 
investors  and  improve  disclosures  to  them,  including  in  cases  of  cross-border 
purchases for end-investors, cannot be sufficiently achieved by the Member States but 
can  be  better  achieved  at  Union  level  because  of  the  need  to  lay  down  uniform 
disclosure requirements at Union level the Union may adopt measures, in accordance 
with  principle  of  subsidiarity  as  set  out  in  Article  5  of  the  Treaty  on  the  European 
Union.  In  accordance with  the  principle  of  proportionality,  as  set  out  in  that  Article, 
this  Regulation  does  not  go  beyond  what  is  necessary  in  order  to  achieve  those 
objectives, 

41 

42 

43 

44 

Regulation (EU) No 1093/2010 of the European Parliament and of  the Council of 24 November 2010 
establishing a European Supervisory Authority (European Banking Authority), amending Decision No 
716/2009/EC and repealing Commission Decision 2009/78/EC (OJ L 331, 15.12.2010, p. 12). 
Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 
establishing  a  European  Supervisory  Authority  (European  Insurance  and  Occupational  Pensions 
Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/79/EC (OJ 
L 331, 15.12.2010, p. 48). 
Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 
establishing a European Supervisory Authority (European Securities and Markets Authority), amending 
Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC (OJ L 331, 15.12.2010, p. 
84). 
Directive (EU) 2016/2341 of the European Parliament and of the Council of 14 December 2016 on the 
activities  and  supervision  of  institutions  for  occupational  retirement  provision  (IORPs)  (OJ  L  354, 
23.12.2016, p. 37). 

EN 

18 

  EN 

 
                                                 
HAVE ADOPTED THIS REGULATION: 

Article 1 

Subject matter 

This  Regulation  lays  down  harmonised  rules  on  the  transparency  to  be  applied  by  financial 
market participants, insurance  intermediaries which provide insurance advice  with regard to 
IBIPs  and  investment  firms  which  provide  investment  advice  on  the  integration  of 
sustainability  risks  in  investment  decision-making  process  or  advisory  process  and  the 
transparency of financial products that have as their targets sustainable investments, including 
the reduction in carbon emissions. 

Article 2 

Definitions 

For the purposes of this Regulation the following definitions shall apply: 

(a) 

‘financial market participant’ means any of the following: 

(i) 

an  insurance  undertaking  which  makes  available  an  IBIP,  an  AIFM,  an 
investment firm which provides portfolio management, an IORP or a provider 
of a pension product; 

(ii) 

a  manager  of  a  qualifying  venture  capital  fund  registered  in  accordance  with 
Article 14 of Regulation (EU) No 345/2013; 

(iii)  a manager of a qualifying social entrepreneurship fund registered in accordance 

with Article 15 of Regulation (EU) No 346/2013; 

(iv)  a UCITS management company;  

(b) 

‘insurance  undertaking’  means  an  insurance  undertaking  authorised  in  accordance 
with Article 18 of Directive 2009/138/EC; 

(c) 

‘IBIP’ means either of the following: 

(i) 

(ii) 

an insurance-based investment product as defined in Article 4(2) of Regulation 
(EU) No 1286/2014 the European Parliament and of the Council45; 

an insurance product, made available to a professional investor, which offers a 
maturity  or  surrender  value  and  where  that  maturity  or  surrender  value  is 
wholly or partially exposed, directly or indirectly, to market fluctuations; 

‘AIFM’ means an AIFM as defined in Article 4(1)(b) of Directive 2011/61/EU; 

‘investment firm’ means an investment firm as defined in Article 4(1)(1) of Directive 
2014/65/EU; 

‘portfolio management’ means portfolio management as defined in Article 4(1)(8) of 
Directive 2014/65/EU; 

Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 
on  key  information  documents  for  packaged  retail  and  insurance-based  investment  products  (PRIIPs) 
(OJ L 352, 9.12.2014, p. 1). 

(d) 

(e) 

(f) 

45 

EN 

19 

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(g) 

‘IORP’  means  an  institution  for  occupational  retirement  provision  authorised  or 
registered in accordance with Article 9 of Directive (EU) 2016/2341; 

(h) 

‘pension product’ means either of the following: 

(i) 

(j) 

(k) 

(l) 

(m) 

(n) 

(o) 

(i) 

(ii) 

a  pension  product  referred  to  in  Article  2(2)(e)  of  Regulation  (EU)  No 
1286/2014; 

an individual pension product referred to in Article 2(2)(g) of Regulation (EU) 
No 1286/2014; 

‘UCITS management company’ means a management company as defined in Article 
2(1)(b) of Directive 2009/65/EC or an investment company referred to in Article 1(2) 
thereof; 

‘financial  product’  means  a  portfolio  management,  an  AIF,  an  IBIP,  a  pension 
product, a pension scheme or a UCITS; 

‘AIF’ means an AIF as defined in Article 4(1)(a) of Directive 2011/61/EU; 

‘pension  scheme’  means  a  pension  scheme  as  defined  in  Article  6(2)  of  Directive 
(EU) 2016/2341; 

‘UCITS’  means  an  undertaking  for  collective  investment  in  transferable  securities 
authorised in accordance with Article 5 of Directive 2009/65/EC; 

‘investment  advice’  means  an  investment  advice  as  defined  in  Article  4(1)(4)  of 
Directive 2014/65/EU; 

‘sustainable investments’ mean any of the following or a combination of any of the 
following: 

(i) 

(ii) 

investments  in  an  economic  activity  that  contributes  to  an  environmental 
objective,  including  an  environmentally  sustainable  investment  as  defined  in 
Article 2 of [PO: Please insert reference to Regulation on the establishment of 
a framework to facilitate sustainable investment]; 

investments in an economic activity that contributes to a social objective, and 
in  particular  an  investment  that  contributes  to  tackling  inequality,  an 
investment fostering social cohesion, social integration and labour relations, or 
an  investment  in  human  capital  or  economically  or  socially  disadvantaged 
communities; 

(iii) 

investments  in  companies  following  good  governance  practices,  and  in 
particular  companies  with  sound  management  structures,  employee  relations, 
remuneration of relevant staff and tax compliance; 

(p) 

(q) 

(r) 

(s) 

‘retail investor’ means an investor who is not a professional investor; 

‘professional investor’ means a client who meets the criteria laid down in Annex II to 
Directive 2014/65/EU; 

‘insurance  intermediary’  means  an  insurance  intermediary  as  defined  in  Article 
2(1)(3) of Directive (EU) 2016/97; 

‘insurance advice’ means an advice as defined in Article 2(1)(15) of Directive (EU) 
2016/97.  

EN 

20 

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Article 3 

Transparency of the sustainability risk policies 

Financial  market  participants  shall  publish  written  policies  on  the  integration  of 
sustainability risks in the investment decision-making process on their websites. 

Insurance  intermediaries  which  provide  insurance  advice  with  regard  to  IBIPs  and 
investment firms which  provide investment advice  shall publish  written policies  on 
the  integration  of  sustainability  risks  in  investment  advice  or  insurance  advice  on 
their websites. 

Article 4  

Transparency of the integration of sustainability risks 

Financial  market  participants  shall  include  descriptions  of  the  following  in  pre-
contractual disclosures: 

the  procedures  and  conditions  applied  for  integrating  sustainability  risks  in 
investment decisions; 

the extent to which sustainability risks are expected to have a relevant impact on the 
returns of the financial products made available; 

how the remuneration policies of financial market participants are consistent with the 
integration of sustainability risks and are in line, where relevant, with the sustainable 
investment target of the financial product. 

Insurance  intermediaries  which  provide  insurance  advice  with  regard  to  IBIPs  and 
investment  firms  which  provide investment  advice  shall  include  descriptions  of  the 
following in pre-contractual disclosures: 

the  procedures  and  conditions  applied  for  integrating  sustainability  risks  in 
investment advice or insurance advice; 

the extent to which sustainability risks are expected to have a relevant impact on the 
returns of the financial products advised on; 

how the remuneration policies of investment firms which provide investment advice 
and  insurance  intermediaries  which  provide  insurance  advice  with  regard  to  IBIPs 
are  consistent  with  the  integration  of  sustainability  risks  and  are  in  line,  where 
relevant, with the sustainable investments target of the financial product advised on. 

The  disclosures  referred  to  in  paragraph  1  and  paragraph  2  shall  be  made  in  the 
following manner: 

for  AIFMs,  in  the  disclosures  to  investors  referred  to  in  Article  23(1)  of  Directive 
2011/61/EU; 

for  insurance  undertakings,  in  the  provision  of  information  referred  to  in  Article 
185(2) of Directive 2009/138/EC; 

for IORPs, in the provision of information referred to in Article 41 of Directive (EU) 
2016/2341; 

for  managers  of  qualifying  venture  capital  funds,  in  the  provision  of  information 
referred to in Article 13(1) of Regulation (EU) No 345/2013; 

1. 

2. 

1. 

(a) 

(b) 

(c) 

2. 

(a) 

(b) 

(c) 

3. 

(a) 

(b) 

(c) 

(d) 

EN 

21 

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(e) 

(f) 

(g) 

(h) 

(i) 

1. 

(a) 

(b) 

2. 

3. 

4. 

5. 

for  managers  of  qualifying  social  entrepreneurship  funds,  in  the  provision  of 
information referred to in Article 14(1) of Regulation (EU) No 346/2013; 

for providers of pension products, in writing in good time before a retail investor is 
bound by a contract relating to a pension product; 

for  UCITS  management  companies,  in  the  prospectus  referred  to  in  Article  69  of 
Directive 2009/65/EC; 

for  investment  firms  which  provide  portfolio  management  or  provide  investment 
advice, in accordance with Article 24(4) of Directive 2014/65/EU; 

for insurance intermediaries which provide insurance advice with regard to IBIPs, in 
accordance with Article 29(1) of Directive (EU) 2016/97. 

Article 5 

Transparency of sustainable investments in pre-contractual disclosures 

Where  a  financial  product  has  as  its  target  sustainable  investments  or  investments 
with  similar  characteristics,  and  an  index  has  been  designated  as  a  reference 
benchmark,  the  information  to  be  disclosed  pursuant  to  Article  4(1)  shall  be 
accompanied by the following: 

information on how the designated index is aligned with that target; 

an  explanation  as  to  why  the  weighting  and  constituents  of  the  designated  index 
aligned with that target differ from a broad market index. 

Where  a  financial  product  has  as  its  target  sustainable  investments  or  investments 
with  similar  characteristics  and  no  index  has  been  designated  as  a  reference 
benchmark, the information referred to in Article 4(1) shall include an explanation on 
how that target is reached. 

Where  a  financial  product  has  as  its  target  the  reduction  in  carbon  emissions,  the 
information  to  be  disclosed  pursuant  to  Article  4(1)  shall  include  the  targeted  low 
carbon emission exposure. 

By  way  of  derogation  from  paragraph  2,  where  no  [EU  low  carbon  benchmark]  or 
[positive carbon impact benchmark] in accordance with Regulation (EU) 2016/1011 
is  available,  the  information  referred  to  in  Article  4  shall  include  a  detailed 
explanation  of  how  the  continued  effort  of  reaching  the  target  of  reducing  carbon 
emissions is ensured. 

Financial  market  participants  shall  include  in  the  information  to  be  disclosed 
pursuant  to  Article  4(1)  an  indication  of  where  the  methodology  used  for  the 
calculation of the indexes referred to in paragraph 1 of this Article and benchmarks 
referred to in the second subparagraph of paragraph 3 of this Article are to be found. 

The  European  Banking  Authority  (EBA),  European  Insurance  and  Occupational 
Pensions  Authority  (EIOPA)  and  the  European  Securities  and  Markets  Authority 
(ESMA) shall, through the Joint Committee of the European Supervisory Authorities 
(‘Joint  Committee’)  develop  draft  regulatory  technical  standards  further  specifying 
the details of the presentation and content of the information to be disclosed pursuant 
to this Article. 

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22 

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6. 

EBA,  EIOPA  and  ESMA  shall  submit  those  draft  regulatory  technical  standards  to 
the  Commission  by  [PO:  Please  insert  date  18  months  after  the  date  of  entry  into 
force]. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred  to  in  the  first  subparagraph  in  accordance  with  Articles  10  to  14  of 
Regulation  (EU)  No  1093/2010,  of  Regulation  (EU)  No  1094/2010  and  of 
Regulation (EU) No 1095/2010. 

Article 6 

1. 

(a) 

(b) 

(c) 

(d) 

2. 

Transparency of sustainable investments on websites 

Financial market participants shall publish and maintain on their websites, for each 
financial product referred to in paragraphs (1), (2) and (3) of Article 5, the following:  

a description of the sustainable investment target; 

information on the methodologies used to assess, measure and monitor the impact of 
the  sustainable  investments  selected  for  the  financial  product,  including  its  data 
sources,  screening  criteria  for  the  underlying  assets  and  the  relevant  sustainability 
indicators used to measure the overall sustainable impact of the financial product; 

the information referred to in Article 5; 

the information referred to in Article 7. 

The information to be disclosed pursuant to the first subparagraph shall be published 
in a clear way and in a prominent area of the website.  

EBA,  EIOPA  and  ESMA  shall,  through  the  Joint  Committee,  develop  draft 
regulatory  technical  standards  further  specifying  the  details  of  the  presentation  and 
content of information referred to in point (a) and (b) of paragraph 1.  

EBA,  EIOPA  and  ESMA  shall  submit  those  draft  regulatory  technical  standards  to 
the  Commission  by  [PO:  Please  insert  date  18  months  after  the  date  of  entry  into 
force]. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred  to  in  the  first  subparagraph  in  accordance  with  Articles  10  to  14  of 
Regulation  (EU)  No  1093/2010,  of  Regulation  (EU)  No  1094/2010  and  of 
Regulation (EU) No 1095/2010. 

Article 7 

Transparency of sustainable investments in periodical reports 

1. 

(a) 

(b) 

Where financial market participants make available a financial product referred to in 
paragraphs  (1),  (2)  and  (3)  of  Article  5,  they  shall  include  a  description  of  the 
following in periodical reports: 

the overall sustainability-related impact by the financial product by means of relevant 
sustainability indicators;  

where an index has been designated as a reference benchmark, a comparison between 
the  overall  impact  of  the  financial  product  with  the  designated  index  and  a  broad 
market index in terms of weighting, constituents and sustainability indicators. 

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2. 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

(h) 

3. 

4. 

1. 

2. 

The disclosures referred to in paragraph 1 shall be made in the following manner: 

for AIFMs, in the annual report referred to in Article 22 of Directive 2011/61/EU; 

for insurance undertakings, annually in writing in accordance with Article 185(6) of 
Directive 2009/138/EC; 

for  IORPs,  in  the  pension  benefit  statement  referred  to  in  Article  38  of  Directive 
(EU)  2016/2341  and  in  the  provision  of  information  referred  to  in  Article  43  of 
Directive (EU) 2016/2341;  

for managers of qualifying venture capital funds, in the annual report referred to in 
Article 12 of Regulation (EU) No 345/2013; 

for  managers  of  qualifying  social  entrepreneurship  funds,  in  the  annual  report 
referred to in Article 13 of Regulation (EU) No 346/2013; 

for providers of pension products, in writing at least in annual reports or in reports in 
accordance with national law; 

for  UCITS  management  companies  or  UCITS  investment  companies,  in  the  half-
yearly and annual reports referred to in Article 69 of Directive 2009/65/EC; 

for investment firms  which provide portfolio management, in the periodical reports 
referred to in Article 25(6) of Directive 2014/65/EU. 

For  the  purposes  of  paragraph  1,  financial  market  participants  may  use  the 
information in management reports in accordance with Article 19 or the information 
in non-financial statements in accordance with Article 19a of Directive 2013/34/EU 
where appropriate. 

EBA,  EIOPA  and  ESMA  shall,  through  the  Joint  Committee,  develop  draft 
regulatory  technical  standards  further  specifying  the  details  of  the  content  and 
presentation of information referred to in paragraph 1. 

EBA,  EIOPA  and  ESMA  shall  submit  those  draft  regulatory  technical  standards  to 
the  Commission  by  [PO:  Please  insert  date  18  months  after  the  date  of  entry  into 
force]. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred  to  in  the  first  subparagraph  in  accordance  with  Articles  10  to  14  of 
Regulation  (EU)  No  1093/2010,  of  Regulation  (EU)  No  1094/2010  and  of 
Regulation (EU) No 1095/2010. 

Article 8 

Review of disclosures 

Financial  market  participants  shall  ensure  that  any  information  published  in 
accordance with Article 3 or Article 6 is kept up-to-date. Where a financial market 
participant  amends  such  information,  a  clear  explanation  of  that  change  shall  be 
published on the same website. 

Paragraph 1 shall apply mutatis mutandis to insurance intermediaries which provide 
insurance  advice  with  regard  to  IBIPs  and  investment  firms  which  provide 
investment  advice  with  regard  to  any  information  published  in  accordance  with 
Article 3. 

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Article 9 

Marketing communications 

1. 

2. 

Without prejudice to stricter sectoral legislation, in particular Directive 2009/65/EC, 
Directive  2014/65/EU,  Directive  (EU)  2016/97  of  the  European  Parliament  and  of 
the  Council  and  Regulation  (EU)  No  1286/2014,  financial  market  participants, 
insurance  intermediaries  which  provide  insurance  advice  with  regard  to  IBIPs  and 
investment firms which provide investment advice shall ensure that their marketing 
communications  do  not  contradict  the  information  disclosed  pursuant  to  this 
Regulation. 

EBA,  EIOPA  and  ESMA  may  develop,  through  the  Joint  Committee,  draft 
implementing  technical  standards  to  determine  the  standard  presentation  of 
information on sustainable investments. 

Power is conferred on the Commission to adopt the implementing technical standards 
in accordance with Article 15 of Regulation (EU) No 1093/2010, of Regulation (EU) 
No 1094/2010 and of Regulation (EU) No 1095/2010. 

Article 10 

Amendments to Directive (EU) 2016/2341  

Directive (EU) 2016/2341 is amended as follows: 

(1) 

In Article 19, the following paragraph 9 is added: 

‘9.  The  Commission  is  empowered  to  adopt,  by  means  of  delegated  acts  in 
accordance with Article 60a, measures ensuring that:  

(a) 

(b) 

the  ‘prudent  person’  rule  with  respect  to  the  consideration  of  environmental, 
social and governance risks is taken into account; 

environmental,  social  and  governance  factors  in internal  investment  decisions 
and risk management processes are included. 

Those delegated acts shall take into account the size, nature, scale and complexity of 
the  activities  of  the  IORPs  and  of  the  risks  inherent  to  these  activities  and  ensure 
consistency  with  Article  14  of  Directive  2009/65/EC,  Article  132  of  Directive 
2009/138/EC and Article 12 of Directive 2011/61/EU.’; 

(2) 

the following Article 60a is inserted: 

‘Article 60a 

Exercise of the delegation 

1. The power to adopt delegated acts is conferred on the Commission subject to the 
conditions laid down in this Article. 

2. The power to adopt delegated acts referred to in Article 19(9) shall be conferred 
on  the  Commission  for  an  indeterminate  period  of  time  from  the  date of  entry  into 
force of this Regulation. 

3. The delegation of powers referred to in Article 19(9) may be revoked at any time 
by the European Parliament or by the Council. A decision to revoke shall put an end 
to the delegation of the power specified in that decision. It shall take effect the day 

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following  the  publication  of  the  decision  in  the  Official  Journal  of  the  European 
Union  or  at  a  later  date  specified  therein.  It  shall  not  affect  the  validity  of  any 
delegated acts already in force. 

4. As soon as it adopts a delegated act, the Commission shall notify it simultaneously 
to the European Parliament and to the Council. 

5. A delegated act adopted pursuant to Article 19(9) shall enter into force only if no 
objection  has  been  expressed  either  by  the  European  Parliament  or  the  Council 
within a period of three months of notification of that act to the European Parliament 
and the Council or if, before the expiry of that period, the European Parliament and 
the  Council  have  both  informed  the  Commission  that  they  will  not  object.  That 
period shall be extended by three months at the initiative of the European Parliament 
or the Council.’. 

Article 11 

Evaluation  

By [PO: Please insert date 60 months after the date of entry into force], the Commission shall 
conduct an evaluation of the application of this Regulation. 

Article 12 

Entry into force and application 

This Regulation shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

It  shall  apply  from  [PO:  Please  insert  12  months  following  the  date  of  publication  in  the 
Official Journal of the European Union]. 

However, Article 5(5), Article 6(2), Article 7(4), Article 9(2) and Article 10 shall apply from 
[PO: Please insert the date of entry into force] and Article 7(1) to (3) shall apply from [PO: 
Please  insert  January  1  of  the  year  following  the  date  referred  to  in  the  second 
subparagraph]. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

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