Global Trustee and Fiduciary Services Bite-Sized Issue 5 2024

Global Trustee and Fiduciary Services Bite-Sized | Issue 5 | 2024 7 QUICK LINKS CYBERSECURITY DIVERSITY DORA ELTIF EMIR FINTECH FSB IOSCO SUSTAINABLE FINANCE/ESG UCITS ASIA EUROPE NETHERLANDS NORTH AMERICA UNITED KINGDOM • New – IOSCO has also scheduled work on transition plans being produced by issuers of securities and asset managers. 3. Strengthening Financial Resilience. • IOSCO will maintain a continued focus on margin under stressed conditions, liquidity risks in open-ended funds and on NBFI leverage. 4. Supporting Market Effectiveness. 5. Promoting Regulatory Cooperation and Effectiveness. Link to IOSCO’s UpdatedWorkplan here SUSTAINABLE FINANCE/ESG EP Approve New Rules to Regulate ESG Ratings On 24 April 2024, the European Parliament (EP) voted in favour of new rules that it says “will regulate the ecosystem of ESG rating activities to allow investors to make more considered investments and fight greenwashing.” In its press release, the EP says that “as a rule, separate E, S and G ratings shall be provided rather than a single ESGmetric that aggregates E, S and G factors. Also, if an ESG rating covers the E factor, information will also need to be provided on whether that rating takes account of the alignment with the Paris Agreement and any other relevant international agreements.” The EP’s press release also states that “if an ESG rating covers the S and G factors, information must be given on whether that rating takes into account any relevant international agreements. This breakdown should allow investors to better target their investment into one of the three areas, and have a clearer idea of the rated entity’s credentials.” Finally, the EP says that “the agreed rules add provisions to ensure that the rating agency should explicitly disclose whether the delivered rating assesses how the rated entity affects and is affected by E, S and G factors, i.e. whether the delivered rating addresses both material financial risk to the rated entity and the material impact of the rated entity on the environment, social and governance factors, or whether it takes into account only one of these.” And that, in this way “ESG raters are encouraged to address the material impact of the rated entity on the environment and society (double materiality) more than is currently the case.” The new regulation will enter into force on the 20th day following its publication in the Official Journal of the EU and shall apply 18 months from its entry into force. Link to EP Press Release here Link to Adopted Text here European Parliament Adopts Rules for Firms on Human Rights and Environment On 24 April 2024, the European Parliament (EP) approved the new Corporate Sustainability Due Diligence Directive (CSDDD), agreeing with the Council on “requiring firms and their upstream and downstream partners, including supply, production and distribution to prevent, end or mitigate their adverse impact on human rights and the environment. Such impact will include slavery, child labour, labour exploitation, biodiversity loss, pollution or destruction of natural heritage.” The EP states in its press release that “the rules will apply to EU companies and parent companies with over 1,000 employees and a worldwide turnover higher than 450 million euro. It will also apply to companies with franchising or licensing agreements in the EU ensuring a common corporate identity with worldwide turnover higher than 80 million euro if at least 22.5 million euro was generated by royalties.” The EP also says that “non-EU companies, parent companies and companies with franchising or licensing agreements in the EU reaching the same turnover thresholds in the EU will also be covered. These firms will have to integrate due diligence into their policies, make related investments, seek contractual assurances from their partners, improve their business plan or provide support to small and medium-sized business partners to ensure they comply with new obligations. Companies will also have to adopt a transition plan to make their business model compatible with the Paris Agreement global warming limit of 1.5 º C.”