• Home Reports
    2.1.2. Delegated acts in force issued by the European Commission to supplement and implement legislative acts
2.1.2. Delegated acts in force issued by the European Commission to supplement and implement legislative acts

 

֍   Delegated Directive (EU) 2021/1269 amending Delegated Directive (EU) 2017/593 as regards the integration of sustainability factors into the product governance obligations

Following the entry into force of EU Regulation 2019/2088, the delegated directive clarifies that the consideration of sustainability factors and sustainability objectives must take place in accordance with the requirements set out in the delegated Directive (EU) 2017/593 [1], so that investment firms manufacturing and distributing financial instruments should consider sustainability factors in the approval process and in other product governance and oversight arrangements for each financial instrument to be distributed to clients. Investment firms manufacturing and distributing financial instruments should specify the group of clients with sustainability objectives to which the financial instrument is to be distributed. The sustainability factors of a financial instrument should be disclosed in a transparent manner to enable the distributor to provide their clients or potential clients with the relevant information.

The provisions of the Directive apply to investment firms and ensure consistency with the provisions of Regulation (EU) 2019/2088.

 

֍   Delegated Directive (EU) 2021/1270 amending Directive 2010/43/EU as regards sustainability risks and sustainability factors to be taken into account for undertakings for collective investment in transferable securities

As Directive 2010/43/EU [2] does not explicitly mention sustainability risks and in order to ensure that internal procedures are properly implemented, the purpose of the delegated Directive is to clarify that investment management companies' processes, systems and internal controls reflect sustainability risks and that the capabilities and expertise are adequate to analyse these risks. Investment management companies should continuously assess not only all financial risks but also all relevant sustainability risks referred to in Regulation (EU) 2019/2088 which, if they occur, could cause a material actual or potential adverse effect on the value of the investment.

The provisions of the Directive apply to investment management companies (IMCs) carrying out the activity of management of an undertaking for collective investment in transferable securities (UCITS).

 

֍  Delegated Regulation (EU) 2021/1255 amending Delegated Regulation (EU) No. 231/2013 as regards sustainability risks and sustainability factors to be taken into account by Alternative Investment Fund Managers (AIFMs)

 

As Delegated Regulation (EU) 231/2013 [3] does not explicitly mention sustainability risks, and in order to ensure that internal procedures are properly implemented, the purpose of the Delegated Directive is to clarify that AIFM internal processes, systems and controls reflect sustainability risks, and that capabilities and expertise are adequate to analyse these risks. Furthermore, in order to ensure consistency between Regulation (EU) 2019/2088 and Delegated Regulation (EU) 231/2013, including with regard to conflicts of interest whose existence may harm the interests of an AIFM, AIFMs should include conflicts of interest that may arise as a result of integrating sustainability risks into their processes and systems as well as into their internal controls.

In order to comply with the requirements of Regulation (EU) 2019/2088, the provisions of this delegated regulation are addressed to Alternative Investment Fund Managers (AIFMs).

֍   Commission Delegated Regulation (EU) 2021/1257 of 21 April 2021 amending Delegated Regulations (EU) 2017/2358 and (EU) 2017/2359 as regards the integration of sustainability factors, risks and preferences into the product oversight and governance requirements for insurance undertakings and insurance distributors and into the rules on conduct of business and investment advice for insurance-based investment products

Insurance companies and insurance intermediaries distributing insurance-based investment products and creating insurance products should consider sustainability factors in the approval process and other governance and oversight mechanisms for each insurance product to be distributed to consumers. The sustainability factors of an insurance product should be presented in a transparent manner to enable insurance distributors to provide the relevant information to their customers or potential customers. They must also include conflicts of interest that may stem from the integration of sustainability risks into their processes and systems as well as into their internal controls.

The delegated act is closely linked to the provisions of Regulation (EU) 2019/2088, as together they establish a comprehensive sustainability disclosure system to be applied to insurance companies and insurance intermediaries distributing insurance-based investment products.

 

֍   Commission Delegated Regulation (EU) 2021/1256 of 21 April 2021 amending Delegated Regulation (EU) 2015/35 as regards the integration of sustainability risks in the governance of insurance and reinsurance undertakings

Since the Commission Delegated Regulation (EU) 2015/35 [1]  does not explicitly refer to sustainability risks, and in order to ensure that the system of governance is properly implemented and adhered to, it is necessary to clarify that the system of governance of insurance and reinsurance undertakings and the assessment of those undertakings’ overall solvency needs should reflect sustainability risks. Insurance undertakings that disclose principal adverse impacts on sustainability factors in accordance with Regulation (EU) 2019/2088 should also adapt their processes, systems and internal controls with respect to those disclosures. Also, they must ensure that the staff of insurance and reinsurance undertakings effectively manage risks identified by the risk management system, the remuneration policies of insurance and reinsurance undertakings should contain information on how those policies take into account the integration of sustainability risks in the risk management system.

The delegated regulation takes over sustainability issues from Regulation (EU) 2019/2088 and, amending a regulation issued under the Solvency II Directive, will apply to insurance companies.

 

֍   Commission Delegated Regulation (EU) 2021/1253 of 21 April 2021 amending Delegated Regulation (EU) 2017/565 as regards the integration of sustainability factors, risks and preferences into certain organisational requirements and operating conditions for investment firms

Given that the Commission Delegated Regulation (EU) 2017/565 does not explicitly refer to sustainability risks and in order to ensure that internal procedures and organisational arrangements are properly implemented and adhered to, it is necessary to clarify that processes, systems and internal controls of investment firms should reflect sustainability risks, and that technical capacity and knowledge is necessary to analyse those risks. Investment firms should have in place appropriate arrangements to ensure that the inclusion of sustainability factors in the advisory process and portfolio management does not lead to mis-selling practices or misrepresentation. In order to avoid misrepresentation, before asking clients or potential clients about their possible sustainability preferences, investment firms should assess their investment objectives, time horizon and the specific circumstances of each client or potential client.

The delegated act consolidates Regulation (EU) 2019/2088, Regulation (EU) 2019/2089 and the Taxonomy Regulation and lays down rules that will apply to investment firms.

 

The delegated regulation complements Article 8 of Regulation (EU) 2020/852 by detailing the content, methodology and presentation of the information to be disclosed by financial and non-financial companies regarding the proportion of environmentally sustainable economic activities in their business, investment or lending activities.
Issued under the Taxonomy Regulation, the provisions of this delegated act are addressed to financial market participants and financial advisors, so that entities regulated and supervised by ASF, such as:
·         UCITS, IMCs, AIFMs, investment firms;
·         insurance companies and insurance intermediaries;
·         IORPs, privately managed pension funds, PEPP providers.

 

֍    Commission Delegated Regulation (EU) 2021/2178 of 6 July 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by specifying the content and presentation of information to be disclosed by undertakings subject to Articles 19a or 29a of Directive 2013/34/EU concerning environmentally sustainable economic activities, and specifying the methodology to comply with that disclosure obligation

The delegated regulation complements Article 8 of Regulation (EU) 2020/852 by detailing the content, methodology and presentation of the information to be disclosed by financial and non-financial companies regarding the proportion of environmentally sustainable economic activities in their business, investment or lending activities.

Issued under the Taxonomy Regulation, the provisions of this delegated act are addressed to financial market participants and financial advisors, so that entities regulated and supervised by ASF, such as:

  • UCITS, IMCs, AIFMs, investment firms;
  • insurance companies and insurance intermediaries;
  • IORPs, privately managed pension funds, PEPP providers.

 

 

*************

 

[1] Commission Delegated Directive (EU) 2017/593 of 7 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to safeguarding of financial instruments and funds belonging to clients, product governance obligations and the rules applicable to the provision or reception of fees, commissions or other monetary or non- monetary advantages

[2] Commission Directive 2010/43/EU of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and of the Council as regards organisational requirements, conflicts of interest, conduct of business, risk management and content of the agreement between the depositary and a management company

[3] Commission Delegated Regulation (EU) no. 231/2013 of 19 December 2012 supplementing Directive 2011/61/EU of the European Parliament and of the Council with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision