ESG Finance

 

The United Nations' 2030 Agenda for Sustainable Development, signed in 2015, and the Paris Agreement on climate change, ratified by the European Union in 2016, prompted the European Commission to introduce the Action Plan for Financing Sustainable Growth in 2018. This plan aimed to position Europe as a “global leader in the transition to sustainable development”. 

The implementation of the Action Plan led to the adoption of EU Regulation 2019/2088, known as the Sustainable Finance Disclosure Regulation (SFDR), which sets requirements for sustainability-related disclosures in the financial services sector. The Regulation is part of a broader European regulatory framework, including the 2020 Taxonomy Regulation, which establishes rules for financial intermediaries to harmonise disclosures and ensure the integration of sustainability risks and adverse sustainability impacts in investment and insurance decision-making and advisory processes.  

WHAT THE SFDR REQUIRES

Article 3 of the SFDR requires financial market participants and financial advisors to publish details of their sustainability policies on their websites, particularly regarding sustainability risks and the negative effects of investment decisions on environmental, social and governance (ESG) factors.
The legislator's goal is to strengthen the protection of end-investors, increase awareness in investment choices, and improve the information provided to them.

KEY SUSTAINABILITY CONCEPTS

Before consulting the information on sustainability risks and the negative impact of investment decisions – available in the dedicated section – Banca MPS considers it important to provide clear definitions of some key sustainability concepts. 

OUR COMMITMENT

The Montepaschi Group has been integrating sustainability into the provision of its investment services, since 10 March 2021. This has led to a revision of the following processes: 

1.  Integration of Sustainability Risk in Investment Services
2. Disclosure of Principal Adverse Impacts on sustainability 
3. Rigorous selection of investments based on products and investor preferences

1.    INTEGRATION OF SUSTAINABILITY RISK:

1. ESG risks are integrated into the investment decision-making process.
2. Sustainability criteria are taken into account in investment advice and portfolio management.

2.    DISCLOSURE OF PRINCIPAL ADVERSE IMPACTS:

1. Explanation of how a financial product takes into account the principal adverse impacts on sustainability.
2. Transparency for customers: clear and detailed communication to customers on the management of sustainability risks, the strategy adopted, and how their expressed preferences impact investment decisions in relation to ESG criteria.

3.    RIGOROUS SELECTION OF PROPOSED INVESTMENTS, TAKING INTO ACCOUNT AND BALANCING

1. the characteristics of each product offered 
2. the preferences expressed by customers (environmentally sustainable and sustainable investments). 

THE REGULATORY FRAMEWORK 

As part of the European Commission's sustainable finance strategy, legislators have adopted several regulatory measures that form the core of the European sustainable finance regulatory framework.

Reference Regulations

• On 27 November 2019, the European Parliament and the Council published Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (known as the SFDR Regulation). 
• On 22 June 2020, the Official Journal of the European Union published Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020, known as the Taxonomy Regulation for Environmentally Sustainable Activities.
• On 21 April 2021, the Commission approved the “MIFID II/IDD ESG package", which includes measures to strengthen the flow of investment towards sustainable activities in the European Union. This package includes:
  • Delegated Regulation (EU) 2021/1253 amending Delegated Regulation (EU) 2017/565;   
  • Delegated Regulation (EU) 2021/1255 amending Delegated Regulation (EU) No 231/2013;
  • Delegated Regulation (EU) 2021/1256 amending Delegated Regulation (EU) 2015/35;
  • Delegated Regulation (EU) 2021/1257 amending Delegated Regulations (EU) 2017/2358 and (EU) 2017/2359;
  • Delegated Regulation (EU) 2021/1269 amending Delegated Regulation (EU) 2017/593;
  • Delegated Directive (EU) 2021/1270 amending Directive 2010/43/EU.
• On 6 June 2022, the Official Journal of the European Union published Delegated Regulation (EU) 2022/1288 supplementing Regulation (EU) 2019/2088.