Regulatory Update: March 2022

Each month, FactSet's Regulatory team offers a rundown of the most important developments in compliance and regulatory news. Read on to see which stories dominated the conversation last month.

Environmental, Social, and Governance (ESG)

European Union

• The European Securities Market Authority (ESMA) published its Sustainable Finance Roadmap to ensure the coordinated implementation of the ESG mandate for 2022-2024. ESMA identified three key priorities:
  • Tackling greenwashing and promoting transparency
  • Building National Competent Authorities’ and ESMA’s capacities in the sustainable finance field
  • Monitoring, assessing, and analyzing markets and risks
• ESMA also published a timeline on the steps in the implementation of the Sustainable Finance Disclosures Regulation (SFDR) and related impacted regulations SFDR, Taxonomy Regulation, CSRD, MiFID, IDD, UCITS, and AIFMD.
• The Project Task Force on European Sustainability Reporting Standards (PTF-ESRS) of the European Financial Reporting Advisory Group (EFRAG) has released three additional working papers on the first draft standards on sustainability reporting.
• The European Commission (EC) published a draft proposal of a new Corporate Sustainable Governance Directive, aiming to foster sustainable and responsible corporate behavior and to anchor human rights and environmental considerations in companies’ operations and corporate governance.
• The European Banking Authority (EBA) published a report analyzing the recent developments and challenges of introducing sustainability in the EU securitization market. The report examines how sustainability could be introduced in the specific context of securitization to foster transparency and credibility in the EU sustainable securitization market and the EBA recommends adjustments to the proposed EU Green Bond Standard.
• The Platform on Sustainable Finance (PSF) has submitted a final report to the EC setting out proposals for the structure of a social taxonomy. The PSF proposes a structure for a social taxonomy within the present EU ESG legislative.
• FinDatEx (Financial Data Exchange Templates) has officially published two final templates: the first final version of the European ESG template (EET V1) and the related update to the European MiFID Template (EMT V4). FinDatEx recommends the delivery by product manufacturers as of June 1, 2022.

United States

The U.S. Securities and Exchange Commission (SEC) has unveiled Proposed Climate Disclosure Rules with the release of its long-awaited proposals for climate disclosures for U.S. public companies. This proposal aims to require that for the first time, U.S. public companies provide certain climate-related information in their registration statements and periodic reports. This would include Form 10-K disclosures on climate risks facing their businesses and plans to address those risks, along with various metrics detailing the companies’ climate footprint including Scope 1, 2, and in some cases Scope 3 greenhouse gas (GHG) emissions. The SEC proposes that these first disclosures would be made by larger companies in 2024, based on fiscal year 2023.

The proposals will now be open to a 60-day comment period before the SEC initiates the process to finalize its climate disclosure rules. The SEC has released a fact sheet on the Enhancement and Standardization of Climate-Related Disclosures.

World

The Taskforce for Nature-Related Financial Disclosures (TNFD) released the first draft proposal of its Nature-Related Risk Management Framework for market consultation. This first beta version includes:

• Foundational guidance, including key science-based concepts and definitions
• Disclosure recommendations aligned with the approach and language of the climate-related guidance developed by the Task Force on Climate-related Financial Disclosures (TCFD)
• Practical guidance on nature-related risk and opportunity analysis for companies and financial institutions to consider incorporating into their enterprise risk and portfolio management processes

This launches the beginning of an 18-month process of consultation and development. The release of the final version v1.0 of the framework is expected in the third quarter of 2023.

European Union

• The three European Supervisory Authorities (ESAs), which include EBA, ESMA, and the European Insurance and Occupational Pensions Authority (EIOPA), published a joint report recommending actions to ensure the EU’s regulatory and supervisory framework remains fit-for-purpose in the digital age.
• ESMA launched its Simple, Transparent and Standardised (STS) Register for the notification of securitization under the Securitization Regulation which entered into force on January 1, 2019. This new register will allow originators and sponsors to benefit from an enhanced notification system.
• FinDatEx published the European PRIIPs (packaged retail and insurance-based investment products) Template (EPT) v2.0 to incorporate the necessary changes based on the revised PRIIPs regulatory technical standards (RTS). The products sold from January 2023 onwards will use this new version of the EPT.
• FinDatEx published an updated version of the Solvency II Tripartite Template (TPT V6) incorporating minor error corrections. V6 can be used concurrently with V5 starting March 31, 2022; full cutover to V6 is recommended starting June 30, 2022.
• ESMA is launching a common supervisory action (CSA) with national competent authorities (NCAs) on the application of costs and charges disclosure rules under MiFID II across the EU. This CSA will be conducted during 2022 and will focus on the information provided to retail clients.
• ESMA published an opinion to proposed reforms to the EU Money Market Funds (MMFs) regulatory framework. The proposal aims to improve the resilience of MMFs by addressing liquidity issues and the threshold effects for constant-net-asset-value MMFs.
• The EC published a targeted consultation on options to enhance the Suitability/Appropriateness Framework (as part of MiFID II review).
• ESMA also opened a consultation on its guidelines on certain aspects of the MiFID II suitability requirements. Comments are welcome through April 27, 2022.

World

The Global Legal Entity Identifier Foundation (GLEIF) published its verifiable LEI (vLEI) Ecosystem Governance Framework, which defines the vLEI operational model and describes how the new ecosystem’s range of vLEI issuing stakeholders will qualify for and perform their roles in the Global LEI System.

Marine Hutinel and Nels Ylitalo contributed to this article.

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