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The Regulatory Landscape

One of the main triggers for this shift is regulatory action. The number of regulatory actions tripled between 2018 and 2021. A similar level of regulatory activity, according to the Institute of International Finance, can only be found in the regulatory wave that followed the 2008 global financial crisis.

Without any doubt, the publication of the EU Commission’s  Action Plan: Financing Sustainable Growth  (EU Action Plan on Sustainable Finance) created even more attention.

Since its launch in 2018, the EU Action Plan on Sustainable Finance has inspired financial regulators all over the globe to pursue similar regulatory action.

The EU Action Plan on Sustainable Finance has led to the most complex, overarching regulatory initiatives in the field of sustainable finance and corporate responsibility in the world to date. The EU sustainable finance regulations, in particular the EU Sustainable Finance Disclosure Regulation (SFDR;  Regulation (EU) 2019/2088 on Sustainability-Related Disclosures in the Financial Services Sector ), have impacted all key frameworks regulating financial markets, such as  MiFID II ,  IDD , and  Solvency II .

The EU Sustainability Taxonomy Regulation ( Regulation (EU) 2020/852 on the establishment of a framework to facilitate sustainable investment ) has impacted not only financial institutions, but also large companies as it introduced amendments to the  EU Non-Financial Reporting Directive (NFRD)

Moreover, The European Green Deal (COM(2019) 640 final) put into legislation the political ambition of being the world’ s first climate neutral continent by 2050. 

It sets a roadmap for making the EU’s economy sustainable by turning climate and environmental challenges into opportunities across all policy areas and making the transition just and inclusive for all. It provides a structural response and new growth strategy that sets out ambitions to transform the EU into a modern, resource-efficient and competitive economy where: Economic growth is decoupled from resource use; Natural capital is protected, sustainably managed and restored

Do you know what needs to be done?
As a consequence of this intense regulatory movement, what was deemed to be best practice yesterday—such as the integration of sustainability issues into investment decision- making processes—has now become the baseline regulatory expectation for access to the market. 

Financial institutions must not only be aware of their sustainability risks and adverse impacts but must actively work to minimize them. Financial institutions must understand what needs to be done and find practical solutions to address complex concepts such as sustainability risk and principal adverse impacts—and this is currently expected to be accomplished using ESG data that rarely meet the requirements of financial regulations.

Net Zero Analytics assists senior managers and decision-makers in focusing on key action items by prioritizing them. We have an in-depth understanding of what needs to be done to implement regulatory requirements pertaining to sustainable finance and corporate responsibility.