Mandatory SFDR and EU Taxonomy in 2023 how to startTeam ESG Playbook2024-01-31T02:34:07-05:00
The SFDR and EU Taxonomy sustainability regulations impose mandatory ESG reporting effective January 1, 2023 with a deadline June 30, 2023. Are you ready?
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The SFDR Aims To Improve Transparency & Create Equal Competition
The Sustainable Finance Disclosure Regulation (SFDR) regulation consists of disclosure requirements on the organizational, service and product levels to standardize sustainability performance, hence preventing “greenwashing” and enabling comparisons for sustainable investment decisions.
Who is affected by SFDR?
The SFDR mainly applies to financial institutions (banks, insurers, asset managers and investment firms) operating within the EU. Non-EU entities will be affected indirectly through EU subsidiaries, provision of services in the EU and market pressure.
The EU Taxonomy
EU Taxonomy Aims To Reward And Promote ESG And Sustainability
The EU Taxonomy aims to reward and promote environmentally friendly business practices and technologies. The Taxonomy is a classification system for organizations to identify which of their economic activities, or the economic activities they invest in, can be deemed ‘environmentally sustainable’.
As a screening tool, it seeks to support investment flows into those activities. One of the aims is to provide objective criteria to evaluate action on ESG and sustainability, as opposed to companies demonstrating ESG performance just through reporting.
Who is affected by EU Taxonomy?
The EU Taxonomy points out three groups within scope of taxonomy:
Financial market participants, offering financial products and services within the EU, including occupational pension providers.
Large companies who are required to provide a non-financial statement, according to the Non-Financial Reporting Directive.
The EU and Member States, when establishing public measures, standards or labels for green financial products or green bonds.
Although the EU Taxonomy focuses on sustainable finance, the scope is larger than that, stretching far beyond banking and other financial services.
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