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Sustainability reports and responsible investments, ESG and CSR due diligence. EU Reg. 2022/1288

On 1.1.23 the reg. EU 2022/1288 which updates the criteria to be followed for information on socio-environmental and sustainability reports governance (ESG. Environmental, Social, Governance) responsible investments in the financial market. (1)

Financial market participants and financial advisors are obliged to follow the new rules to disclose the CSR due diligence (Corporate Sustainability Reporting), subject to specific audit, in relation to the investment recipients.

1) Sustainability, ESG and CSR reports. Premise

Sustainability reports, as we have seen, they assume strategic importance when companies intend to raise capital through the financial market. (2) Whose operators - eg. asset managers, institutional investors, insurance companies, pension funds, financial advisors - are indeed subject to the Sustainable Finance Disclosure Regulation (SFDR).

The reg. EU 2019/2088 on the disclosure of sustainable financial products (SFDR) has introduced uniform disclosure criteria at EU level on the integration of environmental, social and governance (ESG) and the consideration of the negative effects for sustainability in the various investment decision-making processes and in the advisory activity.

2) Responsible investments

The technical standards introduced by reg. EU 2022/1288 provide financial market operators with a series of format and models, indicators, metrics and methods to be followed in ESG reporting. With the aim of ensuring the transparency, relevance and consistency, comprehensibility of information on financial products for end investors. They must therefore specify:

- theredescription of the main negative effects on sustainability factors'' associated with the activities of the company and its / their supply chain / s of reference, upstream and downstream. With an explanation of the procedures adopted to prevent, control and mitigate 'excessive damage' (DNSH, Do Not Significant Harm. See reg. UE 2022/1288, article 6 and Annex I, table 1),

- theredescription of the policies relating to the identification and prioritization of the main negative effects on sustainability factors'. As a corollary to the principle of not causing excessive damage (DNSH), the participants in the financial market of responsible investments must disclose the decisions taken on the so-called PAI (Principal Adverse Impacts. article 7 and Annex I, tab. 1),

- engagement policies (engagement policies), compliance with international standards (references to international standards) and the comparison with previous sustainability reports (historical comparisons. Articles 8,9,10).

3) ESG and CSR, information duties

The reg. EU 2022/1288 stresses the need to ensure maximum transparency in information for financial products that promote sustainability characteristics, especially with regard to the principle Do Not Significant Harm, DNSH. The information must therefore follow uniform standards and be offered both on the sites website (disclosure), both in the pre-contractual documents and in the report periodicals to be published every year by 30 June.

The ESG disclosure it must be public and free, easily accessible and clearly visible, fair and non-discriminatory, simple and concise, clear and understandable, not misleading. The reg. UE 2022/1288 even indicates the size, type of characters and colors to be used in the information forms indicated in Annexes IV. All information must also be provided on the sites website, specifying the dates of publication and subsequent updates, to be kept in chronology.

Dario Dongo and Elena Bosani

Notes

(1) Delegated Regulation (EU) 2022/1288 supplementing Regulation (EU) 2019/2088 of the European Parliament and of the Council with regard to regulatory technical standards specifying the details of the content and presentation of information relating to the 'do not cause significant harm' principle, specifying the content , the methodologies and presentation of information relating to sustainability indicators and negative effects for sustainability, as well as the content and presentation of information relating to the promotion of environmental or social characteristics and sustainable investment objectives in pre-contractual documents, on websites and in periodic reportshttps://bit.ly/3JfiSGo

(2) Dario Dongo. Sustainability report, ESG and due diligence. GIFT (Great Italian Food Trade). 18.7.22,

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Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.

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