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The End of Year ESG Regulation Roundup

As we enter the new year, our Data & Research team collate all of the key ESG regulatory updates and announcements from the closing months of 2023. Read on to learn about the 14-point disclosure framework recommended by the Taskforce on Nature-related Financial Disclosures (TNFD), the handover of responsibility to the International Sustainability Standards Board, and more.


The European Supervisory Authorities have redrafted the Regulatory Technical Standards (RTS) that underpin SFDR. The new draft RTS proposes, inter alia, new mandatory principal adverse impact indicators, such as, exposure to companies active in the cultivation and production of tobacco. The European Commission has three months from the publication of the draft in December 2023 to decide whether to endorse it.

EU Taxonomy

The EU has made substantial progress by releasing a set of technical screening criteria for the non-climate environmental objectives within the EU Taxonomy Regulation. These criteria aim to identify economic activities that substantially contribute to crucial aspects such as the sustainable utilisation and safeguarding of water and marine resources, the advancement toward a circular economy, the prevention and control of pollution, and the protection and restoration of biodiversity and ecosystems. With this update, corporates and financial institutions subject to EU Taxonomy reporting requirements will be required to disclose more granular and comprehensive taxonomy data


To conclude their work, in October 2023, the Task Force on Climate-Related Financial Disclosures (TCFD) published its sixth and final status update report summarizing the effectiveness of the process and the implementation of the recommendations they put forward in 2017. The TCFD recognizes that although it found that the number of public companies disclosing aligned information has grown year on year, there is still more progress needed, with a particular focus on the insufficient expertise and the increased risk this presents of underestimating impacts. The TCFD also highlights that additional guidance on climate-related physical risk assessment and adaptation, climate scenario analysis, and Scope 3 GHG emissions would be beneficial.

Further to this, COP28 officially signified the disbandment of TCFD as it has now completed the intentions that were set out when it was conceptualised. As this is recognition that the TCFD and its recommendations are well established, it is not likely that any further improvements will be made. Going forward, it is now the International Sustainability Standards Board’s (ISSB) responsibility to monitor the progress of companies reporting climate related financial disclosures.

TNFD and Biodiversity

The TNFD released its final recommendations in September 2023. At the heart of this release is a 14-point framework for recommended disclosures focused on nature related dependencies, impacts, risks and opportunities, thereby addressing double materiality. The framework follows the same structure as TCFD with the four key pillars of governance, strategy, risk & impact management, and metrics & targets. By doing this, TNFD hopes to encourage more integrated climate and nature reporting. Any reporting against the framework is currently voluntary until any regulators adopt it as a guiding framework.

UK FCA Announcements

The FCA released the final UK Sustainability Disclosure Requirements (SDR) in November. These rules focus predominantly on sustainable investment labels, entity and product level disclosures (including pre-contractual and consumer-facing disclosure for retail clients) and anti-greenwashing and marketing rules. Disclosure requirements are predominantly qualitative, but fund managers may need to use various metrics of their choice to demonstrate their compliance with certain labelling requirements. There are no mandatory metrics to be disclosed (except for those firms who need to comply with the already established TCFD reporting requirements, which is again referred to within the SDR regulation).

Additionally, the FCA acted as observer to the development of a voluntary code of conduct for third party data and ratings providers, with the aim of increasing transparency and enhancing market integrity. The code, released in mid-December, focuses on key outcomes around governance, internal policies and procedures, management of conflict of interest and transparency.


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