On Monday, the European Parliament ECON committee has adopted its position on the « disclosure » proposal of the Sustainable finance package and has decided to extend its scope to banks.
As a background, the European Commission publised on 24th May a package of measures belonging to its sustainable finance action plan. One of these measures is dedicated to disclosure and more specifically the proposal aims at improving disclosure requirements on how institutional investors integrate environmental, social and governance (ESG) factors in their risk processes. In addition, those asset managers and institutional investors would have to demonstrate how their investments are aligned with ESG objectives and disclose how they comply with these duties. Exact requirements will be further specified through Delegated Acts, which will be adopted by the Commission at a later stage.
In the European Parliament, MEP Paul Tang (NL, S&D) was appointed rapporteur for this proposal and has pushed to significantly increase the scope of this proposal and provide more obligations on remuneration aspects. In particular in terms of scope he has suggested to his fellow MEPs to include banks activities (such as corporate loans) in the scope as per his draft reports published end-July 2018. He has also suggested to link in a quantified manner remuneration policies to sustainable finance objectives.
The final version of the text as voted on Monday, does not include corporate lending in the scope but does include banks in the following way:
“a credit institution as defined in point (1) of Article 4 (1) of Regulation (EU) No 575/2013 with the exception of small and non-complex institutions defined under Article 4(1), point 144a thereof which provides investment and credit risk-management processes;”. As per remuneration policies, according to the European Parliament they should be in line sustainable finance objectives but the percentages criteria have been removed.
The Council is currently working on this proposal and once it has a position, trilogue negociations will start between the three institutions. Should the Parliament manage to impose to the other two institutions this scope, credit institutions will have new obligations such as the need to have in place policies on the integration of sustainability risks in their investment and credit risk-management processes.
By Aurélie CASSOU, ABBL & ALFI Senior Adviser, European Affairs