֍ Corporate Sustainability Reporting Directive (CSRD)
The proposed Directive is intended to fully replace Directive 2014/95/EU (Non-Financial Reporting Directive) and amend the provisions of the Directive on annual financial statements, consolidated financial statements and related reports of certain types of companies (2013/34/EU), the "Transparency Directive" (2004/109/EC) and the "Audit Directive" and "Audit Regulation" (2006/43/EC and 537/2014). The proposed Directive aims to: Extend sustainability reporting obligations to include all large companies and all companies with securities listed on regulated markets in the EU, with the exception of micro-enterprises; Require reporting on a full range of sustainability information relevant to the company's business, and reporting to be in line with mandatory EU sustainability reporting standards to be developed by the European Commission; require sustainability information to be subject to a limited level of verification by auditors; and require companies to prepare their financial statements and management reports in a digital format and label sustainability information.
The Directive is proposed to be applied, as provided for in Directive 2014/95/EU, to large companies, including those in the financial market which, at the balance sheet date, exceed the criterion of having an average number of 500 employees during the financial year, thus:
which will have to comply with the mandatory requirements to include ESG aspects in the non-financial statement (see national legislation section), if they go beyond this criterion.
In addition, it is proposed to extend the application of this non-financial reporting requirement to all issuers traded on regulated markets, except micro-enterprises. It also extends the application to insurance companies operating as mutuals and to insurance cooperatives exceeding certain quantitative criteria.
The aim of the Regulation is to achieve greater transparency on sustainability in the financial services sector by establishing disclosure obligations for providers and distributors of financial products and services to customers on the impact of sustainability risk on the profitability of investments, as well as the impact of investments made on sustainability and the promotion of environmental or social features.
The Regulation introduces additional disclosure requirements to existing sectoral legislation (AIFMD, UCITS, Solvency II, IDD and MiFID II) and ensures full and consistent cross-sectoral harmonisation.
The provisions of the Regulation are addressed to financial market participants and financial advisors, such as:
Under the Regulation, two new categories of benchmarks are created for low-carbon activities: a benchmark for climate transition activities and a dedicated benchmark to align investment portfolios with the Paris Agreement objective of limiting global temperature increase to 1.5˚ Celsius above pre-industrial levels.
Given that the Regulation amends the provisions of Regulation 2016/1011 on benchmarks, the provisions of Regulation (EU) 2019/2089 apply by default to benchmark providers.
In Romania, the Bucharest Stock Exchange (BVB) is currently the only entity authorised by ASF as of 24 June 2020 as a benchmark index administrator.
֍ Regulation (EU) 2020/852 of the European Parliament and of the Council on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 (Taxonomy Regulation)
Taxonomy establishes a unified understanding of environmentally sustainable economic activities in the EU through a classification system for sustainable activities and the establishment of performance thresholds, represented by technical screening criteria for six environmental objectives: (1) climate change mitigation; (2) climate change adaptation; (3) sustainable use and protection of water and marine resources; (4) transition to a circular economy; (5) pollution prevention and control; (6) protection and restoration of biodiversity and ecosystems. The Regulation also provides that financial market entities and companies covered by the Non-Financial Reporting Directive (NFRD) will be required to disclose the degree of alignment of their activities and financial products with the EU taxonomy.
The provisions of the Regulation are addressed to financial market participants and financial advisors such as:
In order to enhance the consistency and comparability of non-financial reporting across the European Union, the Directive contains provisions which, inter alia, require companies required to make a non-financial statement to include in the statement environmental, social and governance (ESG) issues, details of the impact of the company's operations on the environment, use of renewable and non-renewable energy, greenhouse gas emissions, water use, air pollution, etc.
The provisions of the Directive apply to large companies, including those in the financial market which, at the balance sheet date, exceed the criterion of having an average number of 500 employees during the financial year, thus: