What key ESG regulatory developments will we see in H2?


As summer begins to gradually wind down, many in the ESG sector are now looking to the developing regulatory trends in the second half of the year.

According to Greenomy head of sustainability Sarah Lokman, H1 2023 saw a significant expansion of the sustainable finance regulatory framework in its complexity and rigidity. Looking ahead to the second half of 2023, the pace in this respect looks slower as companies prepare for 2024.

Lokman explained, “There is not anything as expected as the CSRD/ESRS or the remaining environmental objectives, but there are a few regulations with updates to come.

“First, as one of the most expected of the year, the CSDD Directive may be adopted near the end of the year but it is unlikely that adoption will happen prior to 2024. We can also expect a review of the indicators under the SFDR PAI and accompanying financial product disclosure, as such was requested by the ESAs and is currently in progress.

“The request to review the PAI comes with a need to create a more pragmatic and forward-looking set of indicators, as well as one that aligns with the CSRS’s ESRS.”

The company highlighted that the European Council and the European Parliament reached a provisional agreement on the European Green Bond Standard earlier this year. “The agreement needs to be adopted by the European Parliament and Council but it is estimated that it will be published in the Official Journal of the EU later this year,” Lokman quipped.

Furthermore, while not technically an ESG regulation, by the end of the year the ECB’s second deadline for expectations on integrating C&E risks will end.

Lokman detailed, “Thus, entering 2024 banks are set to include climate and environmental risks in their governance, strategy and risk management.”

“New regulations outside what we just discussed are not expected directly under the Sustainable finance framework are not. Still, updates on affecting adjacent regulations like the recent Regulation on deforestation-free products are happening in the background. They may affect those reporting under the Sustainable finance framework on sustainability issues, just not as directly,” Lokman concluded.

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