Low Carbon Benchmarks Regulation

One of the initiatives arising from the European Commission's Action Plan on Sustainable Finance is a Low CarbonBenchmarks Regulation to provide standardised sustainability benchmarks, which includes:

  • Common standards on climate benchmarks applicable to benchmark administrators relating to methodology and disclosure obligations
  • Two new benchmark standards:
    1. EU Climate Transition Benchmarks
    2. EU Paris-aligned Benchmarks

The two new EU climate benchmarks are not obligatory but by 1 Jan. 2022 EU based benchmark administrators who provide “significant benchmarks” shall endeavour to provide one or more EU Climate Transition Benchmarks.

Disclosure requirements apply in respect of other benchmarks:

  • By 30 April 2020, requirement to disclose how ESG factors are reflected in benchmarks. (For those benchmarks that do not pursue ESG objectives, it shall be sufficient for benchmark administrators to clearly state in the benchmark statement that they do not pursue such objectives.)
  • By 31 December 2021, benchmark administrators shall include in their benchmark statement an explanation of how their methodology aligns with the target of carbon emission reductions or attains the objectives of the Paris Agreement. (Does not apply to interest rate and foreign exchange benchmarks.)
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