E.U. Sustainable Finance Initiatives: Preparing to Apply the Taxonomy Regulation and Other Proposed ESG Regulations (Part One of Two)

Several new laws and regulatory initiatives on sustainable finance will become effective in the E.U. as early as March 2021, including most notably the E.U. Sustainable Finance Disclosure Regulation (SFDR). It remains unclear whether the U.K. will adopt the same or similar changes, or whether the E.U.’s sustainable finance practices will become international standards over time. What is certain, however, is that the demand for, and growth of, investments driven by environmental, social and governance (ESG) factors is a strong trend, and the E.U.’s measures are designed to provide investors with accurate, detailed and comparable information. To inform the industry on those upcoming developments, Travers Smith recently hosted a webinar featuring partners Phil Bartram and Stephanie Biggs, as well as senior consultant Simon Witney. This first article in a two-part series provides an overview of some of the regulatory trends on sustainability in the E.U., along with details about the impending Taxonomy Regulation and other proposed regulatory updates. The second article will describe the multiple tiers of SFDR compliance and the corresponding requirements of each with which managers must comply. For additional commentary on ESG investing disclosures, see “SEC Officials Clarify the Commission’s Stance on ESG Investing and the Role of Disclosure” (Aug. 11, 2020); and “Preparing for the E.U.’s New Regulations for Disclosing Sustainability Risks and Negative Impacts From ESG Investing” (Jun. 9, 2020).

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