ESG Update – Recent Developments in Financial Sustainability Regulation | Hogan Lovells


The transition to a greener and more sustainable economy has become a priority for the European Union (EU). The three European Supervisory Authorities (European Securities and Markets Authority (ESMA), European Banking Authority (EBA) and European Insurance and Occupational Pensions Authority (EIOPA)) aim to ensure that financial markets support and promote this development by integrating environmental, social and governance aspects (ESG) characteristics in their main activities. Going forward, sustainable finance will continue to play a key role in the global, European and national oversight of financial institutions.

On September 13, 2022, the third conference on sustainable finance organized by the German Federal Financial Supervisory Authority (Bundesanstalt für FinanzdienstleistungsaufsichtBaFin) took place in Berlin, showing how important the topic of sustainable finance is currently and will be in the near future, also for the national supervisory practice. During the event, high-ranking representatives of European and national institutions discussed their policy and regulatory objectives. In addition, BaFin experts discussed prudential practices, particularly with regard to the implementation of ESG criteria in risk management systems and the challenges posed by the Sustainable Finance Disclosure Regulation (SFDR). Publications on this event can be accessed here.

The following summary highlights some recent legal and regulatory developments in the area of ​​sustainability.

Delegated Regulation (EU) 2022/1288

The European Commission has adopted the final regulatory technical standards (RTS) under the SFDR on 6 April 2022. The final act was published in the Official Journal on 25 July 2022 as Commission Delegated Regulation (EU) 2022/1288. The RTS will enter into force on 1 January 2023 and aims to strengthen the protection of end investors and to improve the information they receive from a wide range of financial market participants and financial advisers, as well as with regard to financial products. RTS include specifications on

  • reports on the main adverse effects at the entity level;
  • pre-contractual information at product level on environmental or social characteristics and sustainable investment objectives;
  • product-level website disclosures and
  • periodic disclosures at the product level.

BaFin Q&A on SFDR

BaFin published a Q&A document on September 5, 2022 (only available in German) in which BaFin answers various questions about the SFDR.

Among other things, the BaFin clarifies that the English term “promotes” used in Article 8(1) SFDR should no longer be understood to mean “Werbung betreiben(advertisement) but asFordwhich is in line with the interpretation of Article 8 of the SFDR by the European Commission. According to Article 8 of the SFDR, certain pre-contractual information obligations must be fulfilled for financial products that promote environmental or social characteristics.

Therefore, it is not necessary to advertise financial products through marketing messages or television commercials to be considered “promoted”. Even compliance with the imperative obligation to inform can be interpreted as “Ford” (promote). However, it is not sufficient to simply provide information on how sustainability risks within the meaning of Article 2 No. 22 SFDR are taken into account in investment decisions (cf. Article 6, paragraph 1, SFDR ).

According to BaFin, “Ford(the promotion) must have a specific purpose and must be communicated externally. It can be based on active or passive investment strategies.

BaFin’s additional responses relate to the applicability of the SFDR to financial investment intermediaries licensed under § 34f of the German Labor Code (GewO), the obligation to assess the compliance of financial products with Regulation (EU) 2020/852 (Taxonomy rules) and the applicability of the SFDR to existing contracts.

MaRisk Update

BaFin has launched the consultation on the seventh update of the Minimum Requirements for Risk Management (MyRisk) on September 26, 2022. The MaRisk specifies the administrative practice of the BaFin with regard to risk management for financial institutions. The MaRisk Seventh Amendment includes, among other things, requirements for the consideration of sustainability risks in the risk management of financial institutions.

The changes to MaRisk are in line with BaFin’s deferred guidance notice on sustainability risk management issued on December 20, 2019, which should be understood as a non-binding best practice guide despite being deferred. According to the BaFin, the guidelines define the concept of sustainability on the basis of ESG criteria and illustrate the physical risks and the transitional risks that can manifest themselves with increasing intensity through the existing types of risks.

ESMA Sustainable Finance Timeline

On February 21, 2022, ESMA published an implementation timeline for the following elements of EU sustainable finance legislation:

  • taxonomic regulation;

  • taxonomy regulation article 8 delegated act;

  • SFDR;


  • Markets in Financial Instruments Directive (MiFID) and the Insurance Distribution Directive (IDD) delegated acts;

  • Directive on undertakings for collective investment in transferable securities (UCITS) and the Alternative Investment Fund Managers Directive (AIFMD) delegated acts;

  • Directive on Corporate Sustainability Reporting (CSRD).

The timeline is updated regularly. The last update was made on September 26, 2022.

More information on the main actions taken by ESMA can be found in the Roadmap for Sustainable Finance 2022-2024.

Next steps

At the national level, BaFin will increasingly include sustainability aspects in its supervision. In this context, BaFin will focus on analyzing and mitigating the resulting financial risks for the supervised financial institutions as well as ensuring compliance with disclosure requirements.

In addition, BaFin intends to improve consumer protection by preventing the misleading marketing of financial products (greenwashing).

At EU level, ESMA announced on October 10, 2022 its strategic priorities for the next five years. The main elements of ESMA’s sustainable finance strategy are:

  • the efficiency and integrity of ESG markets;
  • a workable regulatory framework;
  • effective and consistent supervision and
  • role of retail investors.

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