Your guide to the European Commission’s Sustainable Finance Action Plan

Keep track of the regulatory developments of the European Commission’s Sustainable Finance Action Plan.


About the Sustainable Finance Action Plan

Scope of the Sustainable Finance Action Plan

EU Taxonomy Regulation

Corporate Sustainability Reporting Directive (CSRD)

Sustainable Finance Disclosure Regulation (SFDR)

Low-carbon benchmark regulation

Industry implications of the European Commission’s Sustainable Finance Action Plan

Securities Services’ view

Key dates


In 2015, the adoption of the United Nations 2030 Agenda for Sustainable Development and the Paris agreement marked a significant shift in global attitudes towards climate change and sustainability.

On 8 March 2018, the European Commission published a first Sustainable Finance Action Plan to channel more funding to environmentally sustainable economic activities, particularly towards activities that can play a critical role in reaching a carbon-neutral and climate-resilient economy by 2050.

Sustainable finance: a renewed strategy for the European Commission

In July 2021, the Commission published its renewed sustainable finance strategy, which particularly focuses on:

  • Financing economic activities that further the transition to sustainable objectives
  • Improving the financial sector’s resilience to sustainable risks
  • Examining the desirability of a social taxonomy and improving opportunities for SMEs and individuals to access sustainable finance

In 2023, the European Commission is expected to clarify some concepts introduced by the Sustainable Finance Disclosure Regulation (SFDR), such as sustainable investment, and to publish a consultation on the review of SFDR. The Corporate sustainability due diligence directive will be adopted as well as the delegated acts specifying the EU sustainability reporting standards. The EU Taxonomy will be complemented by the adoption by the European Commission of delegated acts defining four list of environmental sustainable economic activities for pollution prevention, transition to a circular economy, protection of water resources, and healthy ecosystems.

About the Sustainable Finance Action Plan

The first action plan on sustainable finance has so far mainly resulted in regulatory initiatives, which:

  • Define what environmentally sustainable economic activities are, in particular economic activities that contribute significantly to mitigate climate change or adapt to climate change
  • Introduce transparency obligations for financial products and companies on whether and how they consider sustainability risks borne by investments or resulting from the economic activity carried out as well as on whether and how they consider and mitigate adverse impacts on environmental and social matters resulting from investments or from the exercise of an economic activity

Scope of the Sustainable Finance Action Plan

EU Taxonomy Regulation

The EU Taxonomy Regulation entered into a phased-in application as of January 2022.

The EU Taxonomy Regulation establishes a taxonomy of sustainable economic activities for each EU environmental objective – namely, climate change mitigation, climate change adaptation, pollution prevention, circular economy, protection of marine resources, healthy ecosystems – which (i) contribute significantly to reach at least one of the objectives (ii) without harming significantly any of the 5 other objectives (iii) while meeting minimum social and governance safeguards.

The EU Taxonomy Regulation also introduces transparency requirements:

  • On the proportion of investments in environmentally sustainable economic activities for financial products in the scope of SFDR with environmental characteristics or sustainable investment as an objective and,
  • On KPIs showing the alignment of activities carried out by companies subject to the Non-Financial Reporting Directive (NFRD) (EU public interest companies with staff over 500 people, covering approximately 11 700 companies and groups) with economic activities listed in the EU taxonomy.

The Platform on Sustainable Finance (PSF) has proposed four lists of sustainable economic activities and their associated screening criteria. The European Commission is expected to launch a consultation in Q1 2023 and delegated acts are expected to be published in the Official Journal in Q3 2023.

The entry into application of the EU taxonomy for the four remaining environmental objectives (pollution prevention, circular economy, protection of marine resources, healthy ecosystems) is not expected before Q4 2024.

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Corporate Sustainability Reporting Directive (CSRD)

On 21 April 2021, the European Commission published a proposal for a Corporate Sustainability Reporting Directive (CSRD) that amends the Non-Financial Reporting Directive in order to:

  • Extend the scope of NFRD to all large companies and all EU or non-EU companies listed on regulated markets (except listed micro-enterprises)
  • Require the audit (assurance) of reported information
  • Introduce more detailed reporting requirements, and a requirement to report according to mandatory EU sustainability reporting standards
  • Require companies to digitally ‘tag’ the reported information so that they may be machine readable and feed into the European single access point (ESPA) that will be implemented as of 2024

On 23 February 2022, the Commission published a proposal for a Directive on corporate sustainability due diligence.

  • Large EU companies and Non EU-companies active in the EU that have a turnover above a certain threshold would have to identify, bring to an end, prevent, mitigate and account for negative human rights and environmental impacts in the company’s own operations, their subsidiaries and their value chains.
  • In addition, certain large companies would need to have a plan to ensure that their business strategy is compatible with limiting global warming to 1.5 °C in line with the Paris Agreement.
  • On 30 November 2022, the Council of the EU adopted its position
  • After the EU Parliament has adopted its position (which is expected in March 2023), the trilogue will start to reach a consensus on a final text.
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Sustainable Finance Disclosure Regulation

The Sustainable Finance Disclosure Regulation – SFDR – entered into a phased-in application on 10 March 2021. SFDR applies to financial products (IORPs and private pensions, managed portfolios, UCITS, AIFs, insurance-based products) marketed in the EU, and to their manufacturers and financial advisers, by introducing transparency requirements:

  • On consideration of sustainability risks borne by financial products
  • On policies considering adverse impacts on environmental and social matters and associated indicators for manufacturers of financial products in the scope of application of NFRD, financial products manufactured by them and for financial products with environmentally sustainable investments as objectives
  • On the description of ESG characteristics or sustainable investments as objective in pre-contractual documents and on their attainment in periodic reports
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benchmark regulation

The low-carbon benchmark regulation:

  • Defines two new EU voluntary standards, namely the EU climate transition benchmark and the Paris-aligned benchmark, for EU low-carbon benchmarks that are on a decarbonisation trajectory;
  • Introduces new transparency requirements on consideration of sustainability factors by benchmarks (with the exception of interest and currency rate benchmarks).

The CTB and PAB represented about 34% of the climate benchmarks at the end of December 2022, according to a report on a study on the feasibility of minimum standards and transparency requirements of an EU ESG benchmark commissioned by the European Commission. This report concludes that a staged approach to the adoption of an EU ESG benchmark could be adopted with the adoption of a voluntary label based on minimum standards for each of the tree aspects (E,S and G), the reference point being 2025 when disclosure under CSRD starts.

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Amendments to
other regulations

Amendments to the UCITS Directive, AIFMD, MiFID II, Solvency II align the risk management process and due diligences process with new transparency requirements under the sustainability-risk disclosure regulation.

Amendments to MiFID II and the Insurance Distribution Directive (IDD) define which categories of financial products can be advised for clients who express sustainability preferences when asked the question as required by suitability assessment.

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Industry implications of the European Commission’s Sustainable Finance Action Plan

Although institutional investors and banks welcome the Sustainable Finance Action Plan, they are faced with difficulties in collecting granular and reliable data on sustainability to meet their transparency obligations.

Sequencing issues in the implementation of the sustainable finance regulatory framework have not eased these difficulties as law-binding transparency obligation on sustainability issues will only start to apply to investee companies from 2025.

Institutional investors also face, on the one hand, the demand for sustainable financial products from their customers and, on the other hand, the risk of complaints about greenwashing partly due to definitions/concepts introduced in SFDR which have given rise to various interpretations and which ESMA has asked the Commission to clarify. Such clarification is expected in Q1/Q2 2023.

Securities Services’ view

The lack of sustainability data should gradually be resolved between 2025 and 2029 thanks to the phased-in entry into application of the EU taxonomy disclosure obligation for companies as well as the phased-in entry into application of CSRD.

The following actions, which are part of the renewed sustainable finance action plan, will also help to solve the data issues:

  • Enhancing the quality of data providers on ESG research and ratings
  • Promoting sustainable finance globally

Key dates of the European Commission’s Sustainable Finance Action Plan

1 January 2022

  • Financial products: pre-contractual documents and periodic reports for financial products with ESG characteristics or objectives must comply with SFDR & EU Taxonomy requirements of level 1 texts
  • EU Taxonomy: companies must comply with simplified disclosure obligations

2 August 2022

  • Entry into application of AIFMD, UCITS, MiFID II amendments

1 January 2023:

  • Financial products: pre-contractual documents and periodic reports for financial products with ESG characteristics or objectives must comply with SFDR & EU Taxonomy detailed requirements of the Regulatory Technical Standards (RTS)
  • EU taxonomy: non-financial undertakings must disclose the degree of alignment of their economic activities with the EU Taxonomy  

Q2/Q3 2023

  • SFDR
    • the European Commission is expected to consult on a review of SFDR with a focus on how it can ensure legal certainty, usability and prevent greenwashing
    • EC response to ESAs request for clarification on the main concepts of SFDR (of which sustainable investment) is expected
  • EU TAXONOMY: Publication in the official Journal of delegated acts to define the list of economic for the four remaining environmental objectives
  • CSRD: Adoption of the general set of standards for sustainability reporting
  • ESMA GUIDELINES: Use in fund’s name of ESG or sustainability-related terms

June 2023:

  • SFDR: large product manufacturers must disclose principal adverse impact indicators on sustainability factors

Q3-Q4 2023:

  • CS3D: Adoption of the directive
  • CSRD:Expected publication by EFRAG of sustainability reporting standards for listed SMEs, as well as sectorial standards.
  • SFDR:ESMA advice to the EC on the review of PAIs in the RTS and on minimum sustainability criteria or a combination of criteria for Art 8 products.

1 January 2024:

  • EU Taxonomy: Financial undertakings will have to meet the detailed disclosure obligation

May 2024:

  • ESAs Report on greenwashing is expected

1 January 2025:

  • EU TAXONOMY: Entry into application of the four remaining environmental objectives.

CSRD: in scope companies must disclose standardised sustainability reporting that is externally audited from:

  • January 2025 (for year 2024) for companies already subject to NFRD;
  • January 2026 (for year 2025) for non-NFRD Companies;
  • January 2027 (for year 2030) for listed SMEs, small-non complex credit institutions, captive insurance
  • January 2030 (for year 2029) – tbc for non-EU companies (with > Eur 150 M turnover in the EU)