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European regulation

The European Commission adopted the Action plan on financing sustainable growth in March 2018. The plan describes the principles for a common Taxonomy, rules for the provision of information on sustainability risks, and rules for sustainable benchmarks.

The plan also introduces sustainability requirements in financial services (MiFID II, UCITS, AIFMD, Solvency II and IDD). Lastly, under stricter reporting rules (the Corporate Sustainability Reporting Directive, or CSRD), large listed companies, insurers and banks must include sustainability information in their management reports.

The European Commission published its Sustainable Finance Strategy in addition to the action plan and as part of the framework of the European Green Deal on 6 July 2021. The strategy includes an expansion of the taxonomy, a minimum standard for sustainable products and the development of sustainable standards and labels.

The multiplicity of these regulatory developments means that financial institutions will have to satisfy onerous requirements with respect to sustainability in the coming years.