Regulations concerning the environmental and climate impact of business operations

2030 Agenda

A resolution adopted in September 2015 by all UN member states. The document defines 17 Sustainable Development Goals (SDGs), the implementation of which will lead us to a sustainable world. The Goals defined in the Agenda can be assigned to 5 areas: People, Planet, Prosperity, Peace and Partnership. For each Goal, specific tasks to be achieved by 2030 are listed – a total of 169 tasks. These include eradicating poverty and hunger, protecting the planet and ecosystems from degradation, safeguarding democracy and global peace, and fostering partnerships to achieve the Goals.

The Paris Agreement

United Nations Framework Convention on Climate Change – the first universal and legally binding global agreement on climate issues, signed in 2015 by nearly 190 countries, including the EU and its Member States. It sets out a global action plan to protect the planet from the threat of far-reaching climate change by limiting global warming to below 2°C and aiming to keep it at 1.5°C. Important for the banking sector is the fact that the Paris Agreement commits parties to ensure that financial flows are consistent with the climate goals of the agreement, i.e. to eliminate investments in climate-damaging projects.

European Green Deal

International action to combat climate change is being led by the European Union, which in December 2019 launched the European Green Deal – a roadmap to take the EU economy to net zero greenhouse gas emissions by 2050, and in which economic growth will be decoupled from resource consumption and societies and regions will be brought into alignment.

European Commission Guidelines on reporting climate-related information (TCFD)

A document issued by the European Commission which provides practical recommendations for companies on how to properly report the climate impact of their operations and the impact of climate change on their business. The European Commission Guidelines incorporate the international recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The aim of the document is to provide uniform, useful and forward-looking information on the material financial impacts of climate-related risks and opportunities, including those related to the global transition to a low-carbon economy.

EU Taxonomy Regulation

Regulation (EU) 2020/852 of the European Parliament and of the Council on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088, known as the EU Taxonomy, is a system of uniform classification of sustainability measures to support investors in their investment decisions. The EU Taxonomy imposes a number of reporting obligations on companies subject to the obligation to publish non-financial information, which will come into full effect for credit institutions in 2024. A key performance indicator for credit institutions will be the Green Asset Ratio, which measures the percentage of exposures related to Taxonomy-aligned activities compared to the total assets covered of those credit institutions (adjusted assets).

Sustainable Finance Disclosure Regulation (SFDR)

The SFRD Regulation imposes new obligations on financial market participants and financial advisers, including banks, to be transparent and disclose their approach to managing risks to sustainability in their investment activities and investment decisions.

European Banking Authority (EBA)

Established in 2011, the European Union authority tasked with implementing a common, standard set of rules for the regulation and supervision of the banking sector in all EU member states. The Authority aims to protect the public interest by creating an efficient, transparent and stable single market for banking products in the EU.

Corporate Sustainability Reporting Directive (CSRD)

The EU directive is intended to replace the current NFRD (Non-Financial Reporting Directive) and will apply to a wider range of companies across the EU. Among other things, the document envisages a standardised approach to reporting on sustainability issues within the management report, through the creation of a single reporting standard. At the time of writing, a draft of this standard is under consultation. In addition, the CSRD introduces an obligation for the information and data contained in the report to be audited by an independent external body.