Regulation

Overview

This webpage is dedicated to providing information on the latest and most relevant regulatory schemes in the field of climate finance. We focus on the most recent initiatives and guidelines issued by both European and international financial regulation authorities. In addition, we highlight the primary limitations articulated by these regulators.

European Central Bank (ECB)

  • COMMON MINIMUM STANDARDS (2022). The common minimum standards dictate that evaluating climate change risks should adhere to the same rigorous standards of quality and reliability as any other risk factor assessment. These climate change risk assessments must seamlessly integrate into the standard rating process. The standards also outline specific requirements for data sources, methodologies, and processes to be employed. Click on this LINK to access further details.
  • CLIMATE CHANGE INDICATORS (2023). This report from the ECB offers a brief overview of the released indicators, outlines the methodology, and underscores any existing reservations, constraints, and opportunities for future enhancements. The project encompasses three distinct sets of indicators, each addressing various aspects of the subject and being released at different stages of development. Click on this LINK to access further details.
  • ECB POLICY PORTFOLIOS (2023). This report marks the ECB’s inaugural climate-related financial disclosures for its own funds portfolio and the staff pension fund. The disclosures align with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) from the Financial Stability Board (FSB), covering areas like “Governance,” “Strategy,” “Risk management,” and “Metrics and targets.” Additionally, the Euro system has devised a standardized disclosure framework for the “Metrics and targets” category, incorporating minimum standards for each member. The development of this framework took into account suggestions from the Partnership for Carbon Accounting Financials (PCAF) and the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). Click on this LINK to access further details.
  • DISCLOSURE (2023). This report marks the initial disclosure of the carbon footprint associated with these investments, underlining our commitment to transparency and accountability in ECB initiatives. It also outlines our broader strategy for adjusting the ECB  portfolio, the ECB decision-making process for climate-related actions, and the ECB approach to mitigating climate-related risks. Click on this LINK to access further details.
  • CLIMATE INSURANCE RISK (2023). This discussion paper outlines potential measures that should be examined to address the insurance gap and alleviate the climate change-induced catastrophe risks in the EU through insurance coverage and adaptation strategies. These actions are meant to work alongside proactive mitigation policies aimed at combating climate change and diminishing the related catastrophe risks. They are not intended as a replacement for such policies. Click on this LINK to access further details.
  • ROAD MAP (2021). The Governing Council of the European Central Bank (ECB) has approved an extensive action plan and an ambitious roadmap (refer to the annex) to enhance the integration of climate change considerations within its policy framework. Through this decision, the Governing Council emphasizes its dedication to consistently incorporate environmental sustainability factors into its monetary policy. This choice comes in the wake of the strategy review conducted in 2020-21, during which the assessment of climate change and environmental sustainability played a pivotal role. Click on this LINK to access further details.
  • LOW CARBON TRANSITION (2023). This is article an article included in the ECB Economic Bulletin  that offers an evaluation of how an increased carbon pricing trajectory can influence the macroeconomy while facilitating the shift toward a low-carbon economy. The primary focus is on the euro area. To tackle the substantial uncertainty associated with estimating the effects of elevated carbon pricing, this assessment draws upon a range of macroeconomic models. As part of the ECB’s climate change strategy, this set of models incorporates both newly created ones and those obtained from external sources. Click on this LINK to access further details. The study starts on page 83.

European Banking Authority (EBA)

  • MAPPING CLIMATE RISK (2021). The report’s objective is to chart the extent of banks’ exposure to risk and shed light on the environmentally friendly assessment endeavors that banks have undertaken up to this point. The discoveries offer a distinct view of the deficiencies in banks’ data and underscore the importance of addressing these gaps promptly for a successful and seamless shift toward a low-carbon economy. Click on this LINK to access the document.
  • GREEN LENDING (2022). The European Banking Authority (EBA) launched an industry survey to receive input from credit institutions on their green loans and mortgages as well as market practices related to these loans. The purpose of the survey is to collect both quantitative and qualitative information the EBA can use to advise the European Commission. Click on this LINK to access the document.
  • PRUDENTIAL DISCLOSURES ON ESG (2022). This report introduces the EBA’s ultimate draft Implementing Technical Standards (ITS) concerning ESG risk disclosures in Pillar 3. These ITS offer tables, templates, and accompanying guidelines that specify the requirements outlined in Article 449a of Regulation (EU) No 575/2013, also known as the Capital Requirements Regulation (CRR). These requirements mandate the disclosure of prudential information related to environmental, social, and governance (ESG) risks, encompassing transition and physical risks. This obligation applies to large institutions whose securities are traded on regulated markets within any Member State. Click on this LINK to access the document.
  • GREENWASHING (2023). In May 2022, the European Supervisory Authorities (ESAs) received a request from the European Commission to address the issue of greenwashing. They were asked to provide input on various aspects, including understanding greenwashing, identifying its types and occurrences, assessing the risks it poses to financial sector entities, investors, and consumers, sharing supervisory practices and capacities to combat greenwashing, and highlighting issues in the current legislative framework.


This Report issued by the EBA is their response to this request, offering an initial assessment of the situation. This report is a foundation for the Final Report, expected in May 2024. The findings are based on input from stakeholders through a call for evidence and a survey conducted among competent authorities. Click on this LINK to access the document.

  • EBA ROADMAP (2022). This roadmap delineates the EBA’s agenda for sustainable finance and Environment, Social, and Governance (ESG) risks. It extends and supersedes the EBA’s initial action plan on sustainable finance released in December 2019. The roadmap elucidates the EBA’s strategy and goals concerning ESG and details the responsibilities and assignments received from EU lawmakers and the European Commission, as well as the EBA’s scheduled activities and timelines associated with them. Click on this LINK to access the document.

European Securities and Market Authority (ESMA)

  • GREENWASHING (2023). The European Supervisory Authorities (EBA, EIOPA, and ESMA – ESAs), ESAs, have released their Progress Reports on Greenwashing in the financial sector today. You can find the EBA, EIOPA, and ESMA reports. In these reports, the ESAs present a shared, high-level definition of greenwashing that applies to market participants across their respective areas of responsibility, including banking, insurance, pensions, and financial markets. The ESAs define greenwashing as a practice in which statements, declarations, actions, or communications related to sustainability do not transparently and accurately represent the actual sustainability profile of an entity, a financial product, or financial services. This practice has the potential to mislead consumers, investors, and other participants in the market. Click on this LINK for further details.
  • DISCLOSURES (2023). The purpose of this report is to support and improve issuers’ capacity to offer more comprehensive disclosures and establish greater uniformity in the treatment of climate-related issues in financial statements prepared according to IFRS. The report specifically addresses disclosures concerning climate-related topics in the 2022 annual financial statements of non-financial corporate issuers in Europe. Nonetheless, it’s important to note that this report does not establish best practices or dictate the specific method for disclosing climate-related matters in financial statements. Click on this LINK to access the document.
  • ROAD MAP (2023). ESMA released an implementation schedule on February 21, 2022, covering various EU sustainable finance regulations, including the Taxonomy Regulation, SFDR, the Corporate Sustainability Reporting Directive (CSRD), MiFID, the Insurance Distribution Directive, the UCITS Directive, and AIFMD. This document could serve as a valuable reference due to the multitude of interconnected initiatives it encompasses.  Click on this LINK to access the document.
  • GREENIUM (2023). This article extends the analysis to encompass all categories of environmental, social, and governance (ESG) bonds. It identifies a range of significant factors that could potentially explain the greenium phenomenon. This topic holds relevance for multiple aspects of ESMA’s responsibilities. Firstly, it directly contributes to our comprehension of investor preferences within the realm of sustainable finance. Secondly, it aids in the examination of any pricing discrepancies among similar debt instruments, which, if left unaddressed, could potentially impact market stability. Lastly, it aligns with ESMA’s strategic focus on monitoring ESG market advancements and evaluating novel financial instruments. Click on this LINK to access the document.


Explore Further

For comprehensive information on the most up-to-date regulatory schemes, we encourage you to visit the official websites of the respective regulatory authorities. Stay informed about the evolving landscape of climate finance and sustainability.

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