The transition towards a sustainable society is one of the most important challenges of our time. The AFM recognises the importance of this transition and encourages financial institutions to play their part. Financial institutions mobilise capital for sustainable investment by governments, companies and households and contribute to improving the sustainability of businesses by focussing on sustainable practices in their business operations.

The AFM’s mission relates to the sustainability transition in several ways, providing the basis for the AFM’s definition of its own role therein. The availability and quality of information throughout the entire chain continues to be one of the key focus areas of the AFM. This applies all the way from prospectuses and integrated reporting to transparency regarding the integration of sustainability risks in investment portfolios and their effects on sustainability factors.

The AFM's view on sustainability

Our position paper ‘The AFM and Sustainability’ (Dutch) gives a general description of the (supervisory) risks in the market for sustainable finance, the AFM’s expectations of market participants with respect to sustainability and the way in which the AFM intends to structure its supervision in this area. The issue of information is one of the key problems in the market for sustainable finance, and is part of the reason why supply and demand are not adequately matched. This also gives rise to various supervisory risks. Based on these risks, the position paper presents AFM’s expectations with regards to the market. The infographic below provides an overview of the most important aspects.


European regulation

The European Commission adopted the Action plan on financing sustainable growth in March 2018. The Action Plan contains principles for a common Taxonomy, rules for the provision of information on sustainability risks, and rules for sustainable benchmarks. The Action Plan also introduces sustainability requirements for financial services (MiFID II, UCITS, AIFMD, Solvency II and IDD). Lastly, stricter reporting rules (the Corporate Sustainability Reporting Directive, or CSRD) require large listed companies, insurers and banks to include sustainability information in their management reports.

Building upon the Action Plan and within the framework of the European Green Deal, the European Commission published its new Sustainable Finance Strategy on 6 July 2021. The strategy provides for an expansion of the taxonomy, a minimum standard for sustainable products and the development of sustainability standards and labels.

The multiplicity of these regulatory developments means that financial institutions will face arduous challenges with respect to sustainability in the coming years.

Information provision, risk management and advice

The Sustainable Finance Disclosure Regulation (SFDR)

The SFDR prescribes rules with respect to transparency on sustainability on the part of financial market participants and financial advisers. The aim of the SFDR is to improve the provision of information to end investors on the sustainability effects of the investment policy and investment decisions of financial market participants. The SFDR will have a significant impact on financial undertakings subject to this regulation.

Amendments to MiFID II, the UCITS Directive and the AIFMD

The European Commission amended Six Delegated Acts on 21 April 2021. This concerns Delegated Acts under UCITS, AIFMD, MiFID, Solvency II and IDD. The purpose of these amendments is to require market participants to identify, assess and manage relevant financial and operational risks arising from developments with respect to sustainability and to include sustainability factors in their product development procedures and their investment advice to clients.

For example, this implies that financial enterprises must take into consideration the potential negative effects on relevant sustainability factors in their investment decisions, rewrite certain policy documents and ensure that sufficient capacity and expertise for effective mitigation of sustainability risks is available. The rules will apply with effect from August 2022, except for the MiFID integration of sustainability factors into the product governance obligations, which will apply from 22 November 2022.


The demand of investors for information that goes beyond purely financial performance of companies is increasing. For this reason, more and more companies - voluntarily or otherwise - are disclosing information on their sustainability policy in addition to their profit and loss figures. This means that the supervision of the prudent application of sustainability principles in the financial sector is becoming increasingly important. The AFM strongly supports proper integrated reporting including explicit and transparent reporting on sustainability factors.

Read our special publication on 'Transparency on sustainability'

Capital markets

Benchmark Regulation and the low carbon benchmark package

One of the important developments in the capital markets concerns benchmark managers. Based on the EU Action Plan on Financing Sustainable Growth, the European Commission has amended the Benchmark Regulation, requiring managers to report on how sustainability (by way of ESG factors) is incorporated in their methodology and benchmark statements.

This means that benchmark managers must include information in accordance with the Delegated Regulations in their disclosure to benchmark users. In addition, two new benchmark categories or labels have been created for so-called ‘low carbon benchmarks’: the ‘Paris-Aligned Benchmark (PAB)’ and the ‘Climate Transition Benchmark (CTB)’. In order to use these labels, a benchmark must meet certain strict requirements defined in the Benchmark Regulation. This will ensure investors that they are investing in accordance with a truly green benchmark when investing in instruments that refer to one of these benchmark categories. Moreover, with effect from 31 December 2021, managers of all benchmarks (apart from interest-rate and foreign-exchange benchmarks) must explain in their benchmark statements how their methodology aligns with the objective for carbon emission or how the benchmark achieves the objectives of the Paris Agreement. Overall, there will be more and more information available for investors as it regards green benchmarks.

In view of the continuing increase in passive investing and the growing popularity of green investments, the AFM is devoting specific attention to the way in which benchmark managers under supervision comply with the legal ESG requirements. Through the Benchmarks Network within ESMA, the AFM also actively contributes to the development of policy, for instance by issuing Q&As in order to provide clarity regarding the rules.

EUA trading

On 7 June 2021, ICE Futures Europe transferred trading in European Union emission allowance contracts (EUA) from its UK platform to the regulated market of ICE Index in the Netherlands. Emission allowance derivatives contracts entitle the holder to emit a specific amount of greenhouse gas (CO₂). With this market instrument, the EU aims to achieve its own climate goals (Paris) and the goals of the Kyoto Protocol.

The move from the United Kingdom to the Netherlands has brought a large proportion of European trading in emission allowance contracts under the supervision of the AFM. This involves secondary trading in futures and options contracts with emission allowances ‘European Union Allowances (EUA)’ and ‘European Union Aviation Allowances (EUAA)’ as the underlying security. The primary trading in these emission allowances is conducted on the European Energy Exchange (EEX) in Germany. Dutch market parties holding emission allowances and wishing to engage in trading need to be registered with the Dutch Emissions Authority (the NEA). The AFM works together with the NEA as well as with the ACM and the German supervisor Bafin when it comes to trading in EUA.

Bond market

The development of the sustainability transition is clearly visible in the bond market, which is growing rapidly in Europe.

This market actually doubled in size in the Netherlands in 2019 and 2020 and is continuing to grow at a similar rate in 2021. In its report ‘Sustainable Bonds in the Netherlands’, the AFM endorses the importance of this positive development. The AFM however also notes the importance of transparency in prospectuses, reporting of relevant non-financial information and standardisation.

The European Commission published its legislative proposal for a European Green Bond Standard (GBS) on 6 July 2021. This proposal creates a voluntary standard for bonds intended to raise finance for sustainable investment. This EU GBS is expected to become the standard for businesses and governments wishing to issue green bonds to fund large investments, while strict sustainability requirements will ensure investor protection. By complying with the EU GBS, issuers will be able to demonstrate that they are indeed financing legitimately green projects (as defined in the EU taxonomy). This will enable investors to more easily compare investments and assess whether their investments are indeed sustainable, thereby reducing the risk of greenwashing. The four core elements of the EU GBS are:

  • In line with the taxonomy: The proceeds of the bond must be allocated to projects that are in line with the EU taxonomy.
  • Transparency: Full transparency on how the proceeds of a green bond are allocated, by means of detailed reporting.
  • External review: All European green bonds must be checked by an external reviewer to ensure compliance with this regulation and the taxonomy
  • European supervision of external reviewers: Reviewers providing services to issuers of European green bonds must be registered with the European Security and Markets Authority (ESMA) and will fall under its supervision.