On 1.1.23 reg. comes into effect. EU 2022/1288, which updates the criteria to be followed for disclosures on Environmental , Social, Governance (ESG.) social and environmental sustainability reports of responsible investments in the financial market. (1)
Financial market participants and financial advisers are obliged to follow the new rules to disclose CSR(Corporate Sustainability Reporting) due diligence, subject to special audits, in relation to companies targeted for investment.
1) Sustainability budgets, ESG and CSR. Foreword
Sustainability budgets, as noted above, assume strategic importance when companies intend to raise capital through the financial market. (2) Whose operators–e.g., asset managers, institutional investors, insurance companies, pension funds, financial advisors–are indeed subject to the Sustainable Finance Disclosure Regulation (SFDR).
Reg. EU 2019/2088 on the disclosure of sustainable financial products (SFDR) introduced uniform EU-wide disclosure criteria on the integration of environmental, social and governance (ESG) sustainability risks and the consideration of adverse sustainability effects in various investment decision-making processes and advisory activities.
2) Responsible investment
The technical standards introduced by reg. EU 2022/1288 provide financial market participants with a set of formats and templates, indicators, metrics and methods to follow in ESG reporting. With the aim of ensuring the transparency, relevance and consistency, understandability for end investors of financial product information. They must therefore specify:
– the ‘description of the main negative effects on sustainability factors‘ associated with the company’s activities and its upstream and downstream supply chain(s). With exposition of the procedures adopted to prevent, control, and mitigate ‘excessive harm’ (DNSH, Do Not Significant Harm. V. reg. EU 2022/1288, Article 6 and All. I, Table 1),
– The ‘description of policies related to the identification and prioritization of major adverse effects on sustainability factors‘. As a corollary to the principle of not causing undue harm (DNSH), responsible investment financial market participants must expose decisions made on so-called PAIs(Principal Adverse Impacts. Article 7 and All. I, Tab. 1),
–engagement policies (engagement policies), compliance with international standards(references to international standards), and comparisons with previous sustainability reports(historical comparisons. Articles 8,9,10).
3) ESG and CSR, information duties.
Reg. EU 2022/1288 emphasizes the need to ensure maximum transparency in information for financial products that promote sustainability features, especially with regard to the Do Not Significant Harm, DNSH, principle. Information must therefore follow uniform standards and be offered both on websites(disclosure), in pre-contract documents, and in periodic reports to be published annually by June 30.
ESG disclosure should be public and free, easily accessible and prominently displayed, fair and nondiscriminatory, simple and concise, clear and understandable, and not misleading. Reg. EU 2022/1288 even indicates the size, font type and colors to be used in the information forms shown in Annexes I-V. All information should also be provided on the websites, specifying dates of publication and subsequent updates, to be kept in history.
Dario Dongo and Elena Bosani
Notes
(1) Delegated Regulation (EU) 2022/1288 supplementing Regulation (EU) 2019/2088 of the European Parliament and of the Council with regard to regulatory technical standards specifying the details of the content and presentation of the information related to the principle “not to cause significant harm”, specifying the content, methodologies and presentation of the information related to sustainability indicators and adverse sustainability effects, and the content and presentation of the information related to the promotion of environmental or social characteristics and sustainable investment objectives in pre-contractual documents, on websites and in periodic reports. https://bit.ly/3JfiSGo
(2) Dario Dongo.
Sustainability reporting, ESG and due diligence.
. GIFT (Great Italian Food Trade). 18.7.22,
Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.
Lawyer in Milan and Frankfurt am Main. An expert in family, juvenile and criminal law, she is now enrolled in a university master's programme in food law
 social and environmental sustainability reports of responsible investments in the financial market.){kind=link}