Sustainable Finance Action Plan The European Commission has announced a Sustainable Finance Action Plan as part of the Capital Markets Union. This action plan sets out a timeline of legislative, non-legislative and secondary level initiatives which will be pursued over the next two years. The proposals foreseen in the Action Plan demonstrate the Commission’s new focus to enable financial services to take a leading role in Environmental and Social Governance (ESG). The EU expects that these proposals will set and lead global best practice in the area of sustainable finance. The aim of this plan is to reorient capital flows towards sustainability, manage risks from climate change and environmental and societal issues and foster transparency and long term thinking in finance and move away from short term gains.

Key Elements of the Action Plan EU Taxonomy Regulation This Regulation lies at the heart of the plan and is interlinked to other actions. It aims to provide the foundation of a EU classification system on what will be considered to be sustainable and sets out green standards, green labels and green prudential requirements. It will give the Commission the ability to update these definitions via delegated acts. Legislation

Timeline: Q2 2018

ESG Legal Requirements for Asset and Investment Managers Institutional investors and asset managers will need to factor in sustainability factors into their decision processes so the Commission will propose a law that ensures that ESG factors are considered. It will require that end-investors are understand their exposure to sustainability risks.

Legislation (TBC)

Timeline: Q2 2018

Incorporation of Sustainability into MIFID II and IDD The Commission will look to amend and change both MIFID II and IDD to incorporate sustainability criteria and assessments into their regimes.

Level 2 Legislation

Timeline: Q1 2019

Imbedding of Sustainability into Credit Rating Agencies After consultation, a study by ESMA and industry engagement, the Commission will look to provide guidelines ensure sustainability criteria is imbedded into assessments by credit agencies. This will be coupled with a new Credit Agency focused on sustainability whilst ESMA will assess market practices and provide guidance on the embedding of ESG information into guidance on disclosure. Non-legislative

Timeline: Q3 2019

A Sustainable Prudential Regime for Banks and Insurance The Commission will incorporate climate risks into institutions’ risk management policies and the calibration of capital requirements of banks as part of the Capital Requirement Regulation and Directive (CRRD) Any recalibration of the capital requirements will be based on the assessment of the prudential risk of banks’ exposures to climate change-related assets and will be linked to the EU Taxonomy criteria. EIOPA will call for evidence on sustainable finance prudential rules for long-term investments for insurers. Their findings will be taken into account in the 2020 review of Solvency II. Non-legislative

Q3 2018

EU Ecolabel to be Applied to Financial Services Once the EU Taxonomy Regulation is adopted the Commission will set out Eco Label criteria for retail investment products such as PRIIPs so that investors will clearly understand the level to which a financial services product has a positive social ESG impact. Level 2 Legislation

Timeline: Q3 2019

Reducing Short-termism in Capital Markets The Commission will consult on whether corporate boards should be required to develop and disclose a long-term sustainability strategy with measurable sustainability targets and identify specific areas of business development. Non-legislative

Timeline: Q1 2019

Fitness Check on Corporate Reporting The Commission will launch a fitness check of EU legislation, such as the NFI Directive, to ensure and assess whether public reporting requirements on s