Sustainable Finance is now in the focus of public and political attention. This is because the global financial system has an important role to play in the implementation of the United Nations 2030 Agenda (Sustainable Development Goals) and the Paris Climate Agreement. By directing financial flows into sustainable activities and integrating environmental, social and governance (ESG) criteria into business and investment decisions, the financial sector has great potential to change markets and to shape sustainable economic systems.
In March 2018, the European Commission’s Action Plan on Sustainable Finance provided decisive impetus to the topic of sustainable finance. The Action Plan sets out a comprehensive strategy to connect sustainability and finance, by amending financial regulations and policies and explicitly introducing sustainability aspects.
Legal is a market and thought leader in the field of Sustainable Finance and we can make the most of extensive know-how from various successful projects with financial institutions. We help you meet the regulatory requirements while harnessing the business potential of sustainable finance.
We have specialist teams to help you address your environmental, social and governance (ESG) challenges as well as subject matter knowledge, combined with an in-depth understanding of the local regulatory landscape.
Given the green regulatory tsunami, there is an inherent risk of missing out on critical topics or taking required actions too late. The Sustainable Finance Regulatory Radar, a web-based platform, is our response to the regulatory avalanche, allowing users to keep track of the latest sustainability-related trends worldwide. We use it to provide clients with a comprehensive overview of the latest regulatory developments in various jurisdictions globally, including impact assessments and recommended actions.
Adapting to the constantly changing sustainable finance regulatory landscape and being compliant is key for financial institutions. In order to implement the various new requirements, institutions must be aware of the required changes. Therefore, we offer to conduct Regulatory Gap Analysis comparing status quo and the changes required by law as well as the specific impact of regulatory changes on organisations. By analysing the regulatory gap, we lay the foundations for all of the next steps (e.g. implementation).
The implementation of the many new regulatory requirements for Sustainable Finance is a highly challenging task for financial institutions, requiring sustainable finance regulation expertise, in-depth understanding of the business requirements and careful planning with consideration of all relevant aspects. We accompany our clients’ strategic regulatory transformation, providing an integrated approach that aligns the regulatory business requirements with the institution’s specific and strategic priorities complemented by excellent regulatory and market expertise in the field.
Sustainability risk management is one of the central pillars of the new regulatory and market developments in Sustainable Finance and is one of the most challenging topics for financial institutions in relation to sustainability. We support our clients in designing an ESG Risk Management and Control Framework for the effective management of ESG risks throughout their organisation.
With increasing regulatory and market pressure on sustainable finance, financial institutions need a strong and efficient corporate governance structure in relation to sustainability. We help you define the sustainability structure that best suits your needs and ambitions.
The new sustainability-related regulatory requirements put significant pressure on financial institutions to find the best suitable solutions for their business. This includes exploring the opportunity to use their own ESG rating methodologies to comply with the requirements, as well as providing added value to their clients. We support you with this opportunity.
Within their micro- and macroprudential mandate, regulatory bodies have to address climate-related risks. We offer to review/analyse the current framework and the corresponding instruments at their disposal with a view to including sustainability considerations. In addition, we support authorities by providing a market study, which: a) highlights their new supervisory tasks towards market actors, b) stresses their duties towards other regulatory bodies (e.g. providing information) and c) provides an in-depth market overview of key developments in sustainable finance.
The EU-SFDR obligates you as a financial market participant to disclose to clients and investors how green your financial products are. Moreover, it stipulates that you must disclose how sustainability risks are integrated into the provision of services, for example, portfolio management and investment advice. Under the EU-SFDR, you must classify your financial products into one of three categories: mainstream, light green or dark green. Additionally, it is required that you carry out a due diligence process to consider the “principal adverse impacts”.
You are required to carry out an alignment assessment of your portfolio against the EU-Taxonomy, which defines which economic activities of your underlying investments (companies and projects) are considered as sustainable. By doing so, you are allowed to brand your investments as sustainable. The EU-Taxonomy fights greenwashing and improves transparency for sustainable investments.
Correctly assessing and evaluating climate risks is key to protecting your company value. Therefore, a third-party review of your integrated climate risk framework reduces the risk of being blindsided by any climate risks you have not yet considered and ensures compliant regulatory reporting. Moreover, we are seeing a shift whereby regulators are transmitting current soft laws into strict regulations that need to be adhered to.
A tsunami of green regulation is sweeping through the finance industry. The EU Action Plan on Sustainable Finance impacts financial service providers and the real economy. The newly introduced EU Taxonomy, which classifies sustainable economic activities, and the Sustainable Finance Disclosure Regulation (SFDR), which provides guidance for determining the greenness of financial products, must be taken into account when classifying your PRIIP according to ESG criteria (ESG PRIIP). The PRIIPs Regulation already requires that any applicable ESG information must be included in the ‛What is this product’ section of the KID. To ensure consistency and transparency and to counteract greenwashing, the ESG information for a PRIIP must be disclosed in the KID, with reference to the EU Taxonomy and SFDR requirements.
Companies are all unique – and so are their compensation systems. If it’s to do what it’s meant to do, a compensation system should be a good fit with the company’s strategy. A well-balanced compensation system helps to motivate staff, to foster loyalty and to attract new talent. Our services focus on the “G” dimension of ESG and particularly include:
Gender equality is one of the cornerstones of the “S” dimension of ESG. Our data scientists and multicultural experts are extremely experienced in all matters relating to equal pay. Furthermore, our longstanding partnership with the EQUAL-SALARY Foundation enables us to support organisations from all industries and of all sizes and complexities to close their gender pay gap. Our specific services include:
Diversity & Inclusion (D&I) is one of the key topics in ESG and becomes more and more an essential focus point in sustainable finance. Based on our experience, we have evolved an approach that systematically addresses the four key components of D&I management: (i) strategy, (ii) analytics, (iii) awareness and education and (iv) inspiration. Our specific services include: