Discover our news & publications
Information and transparency in terms of environmental, social and corporate governance (ESG) criteria following the entry into application on 10 March 2021 of the main measures of the European regulation on sustainability‐related disclosures in the financial services sector
Posted on 9 March 2021 in News > Insurance > Real Estate, Construction & Urban Planning

As the health crisis goes on, environmental and social concerns not only remain relevant, but are becoming ever more important. Indeed, more and more companies are turning to sustainable and responsible investments, which comply with environmental, social and corporate governance criteria (“ESG”).

These criteria continue to gain importance, especially within the insurance industry. According to the European Insurance and Occupational Pensions Authority (EIOPA), the surge in the frequency and severity of natural disasters induced by climate change must be increasingly taken into account in the long term in risk management strategies, governance and internal risk and solvency assessments.

In this context, information and transparency obligations with regard to compliance with ESG criteria have had to be reinforced, with a view to regulating this type of rapidly developing investment, and to respond to fears of greenwashing: investors must be both informed and reassured about the nature of their investment.

In this regard, the European Union is particularly active, notably in relation to the implementation of regulation 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector, known as the “SFDR Regulation” (for Sustainable Finance Disclosure Regulation).

This regulation applies to all entities offering financial services within the European Union, namely banks, management companies, financial advisers, and insurance companies offering insurance-based investment products – which are products found in life insurance.

The philosophy behind the regulation is based on improving transparency in the publications made by financial entities relating to how the environment is taken into account in financial products. To this end, the regulation provides for classification of financial products into three categories, namely:

  • Products with no sustainability objective;
  • Products promoting environmental or social characteristics (article 8 of the regulation); and
  • Products with sustainable investment as their objective (article 9 of the regulation).

Most of the measures provided for by the regulation came into force on 10 March 2021 and from that date, financial entities have to provide the following information:

  • For all products, including those that do not include any sustainability objective, article 6 of the regulation specifies that the pre-contractual disclosures must describe the manner in which sustainability risks are integrated into their investment decisions and the results of the assessment of the likely impacts of sustainability risks on the returns of the financial products. Otherwise, a clear and concise explanation should be provided as to why sustainability risks are irrelevant to the product.

Article 7 of the regulation specifies that by 30 December 2022, financial entities that are parent companies of a large group with more than 500 employees[1], or entities that take into account the main negative impact of investment decisions on sustainability factors, should supplement the above with information on the main adverse impacts on sustainability factors.

As to the products referred to in Articles 8 and 9 of the Regulation, these are subject to additional specific obligations.

First, the financial entity must publish their sustainability risk management policy (Article 3), the adverse impacts of sustainability factors at entity level (Article 4), and their remuneration policy relating to the integration of sustainability risks (Article 5).

Then, when it comes to the products themselves, the entity must publish the following:

  • For the products referred to in Article 8, information on how the environmental and social characteristics are met, as well as information on any reference benchmark used to classify the product;
  • for products referred to in Article 9, when a financial product has sustainable investment as its objective and has been designated as a reference benchmark, information on how the designated index is aligned with that objective, as well as an explanation as to why and how the designated index aligned with that objective differs from a broad market index, and if there is no index, an explanation of how that objective is to be achieved;
  • Article 10 of the regulation further specifies that for the products referred to in Articles 8 and 9, an up to date a description of the environmental or social characteristics or the objective of sustainable investment, as well as information on the methodologies used to assess, measure and monitor the environmental or social characteristics or the impact of the sustainable investments selected for the financial product; and
  • when a financial product has a reduction in carbon emissions as its objective, information on the objective of low carbon emission exposure in view of achieving the long‐term global warming objectives of the Paris Agreement.

Finally, Article 11 of the Regulation provides that financial market participants who make available the products mentioned in Articles 8 and 9 are required to draft periodic reports describing:

  • the extent to which the environmental or social characteristics are met for products referred to in Article 8; and
  • the overall sustainability‐related impact of the financial product by means of relevant sustainability indicators; or where an index has been designated as a reference benchmark, a comparison between the overall sustainability‐related impact of the financial product with the impacts of the designated index and of a broad market index through sustainability indicators for products referred to in Article 9.

Also, Articles 8(3), 9(5), 10(2) and 11(4) of the regulation specify that the European supervisory authorities will develop, through the Joint Committee, draft regulatory technical standards to specify the details of the content and presentation of the information to be disclosed. However, these provisions will only be applicable as of 1 January 2022[2].

In this regard, the three European supervisory authorities, including EIOPA, approved the latest draft of regulatory technical standards[3] on 4 February 2021. In summary, pre-contractual disclosures must include details on how the product meets ESG objectives, websites must provide information on the ESG characteristics of the products and methodologies used, periodic reports must indicate the extent to which the products meet ESG characteristics through relevant indicators, and finally, information should be published on how sustainable investment products do not significantly undermine sustainable investment goals. The draft has been sent to the European Commission for adoption, which should take place within three months.


Do not hesitate to contact us for more information for further details of the obligations prescribed by Regulation 2019/2088, as well as other relevant European texts, and their practical consequences.

[1] As defined by article 3, paragraph 7, of directive 2013/34/EU

[2] Initially, the draft regulatory technical standards were to be submitted to the Commission before 30 December 2020. However, this deadline could not be met due to the pandemic. The Commission considers in any case that application of the regulation is not conditional on the formal adoption and entry into force of these standards: the deadline of 10 March 2021 is maintained for financial market participants and they must provide the information requested from that date. Please see the Letter from the European Commission, Ref.ares(2020)5678036 – 20/10/2020,

[3] Communication by EIOPA, 4 February 2021,


Subscribe to our news updates


Subscribe to our news updates