on 2021-10-2903:02 PM - edited on 2022-01-2707:17 PM by ProductMod
The European Commission (EC) is the executive branch of the European Union (EU), responsible for proposing legislation, implementing decisions, upholding the EU treaties and managing the day-to-day business of the EU. The Commission helps to shape the EU's overall strategy, proposes new EU laws and policies, monitors their implementation and manages the EU budget.
The purpose of the European Commission Regulation (EU) 2019/2088 on Sustainability-related Disclosures in the Financial Services Sector (Disclosure Regulation) is to achieve more transparency regarding how financial market participants and advisers consider sustainability risks in their investment decisions and insurance or investment advice. A sustainability risk is defined as an environmental, social or governance event or condition that, if it occurs, could have a negative material impact on the value of an investment.
The Disclosure Regulation provides harmonised rules applicable as of March 2021 to financial market participants and advisers with regard to:
the integration and consideration of sustainability risks and adverse sustainability impacts in their decision making or investment advice processes; and
the provision of sustainability related information with regard to financial products.
The disclosure obligations under the Disclosure Regulation apply to all financial market participants, including AIFMs, UCITs management companies, investment firms, insurance and credit institutions providing portfolio management, as well as to financial advisers providing investment and/or insurance advice.
The Disclosure Regulation requires, amongst others, that the entities concerned disclose the following information in pre-contractual documents:
the manner in which sustainability risks are integrated into their investment decision or insurance advice;
the potential impacts of sustainable risks on the returns of financial products; and
information on how the financial products consider principal adverse impacts on sustainability factors.
As well as the following on their website:
information on their remuneration policies on how they integrate sustainability risks; and
information on their strategies to consider adverse impacts of investment decisions on sustainability.
Various precontractual documents, such as prospectuses, marketing documents, and annual reports will need to be amended to comply with the Disclosure Regulation. Financial market participants and advisers will be subject to additional disclosure obligations where the financial product promotes environmental and social characteristics, or has sustainable investment as its objectives.
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