Regulation 2019/2088 on sustainability disclosures in the financial services sector

The purpose of EU Regulation 2019/2088 adopted on 27 November 2019, which will enter into force on 10 March 2021, is to establish "harmonised rules for financial market participants and financial advisers on transparency with regard to the integration of sustainability risks and the consideration of adverse sustainability impacts in their processes and the provision of sustainability-related information with respect to financial products"


Réglementation européenne relaive à la transparence sur la durabilité

In its introduction, the text of the Regulation recalls the EU's adherence to the United Nations' Sustainable Development Goals (SDGs) and the Paris Agreement. It recalls the need to put the economy on a more resilient low-carbon path in the long term, not hesitating to speak of the "catastrophic and unpredictable consequences" of climate change and other environmental risks that the EU is increasingly facing.

It emphasises the key role that finance can play in achieving this objective by allocating capital to activities with low sustainability risks or allowing to mitigate these risks.

This Regulation is part of the EU action plan to implement the United Nations "2030 Agenda for Sustainable Development" and therefore addresses the transparency of market participants with regard to the integration of both the objective of sustainability in investments and the mitigation of sustainability risks in their management processes and financial products.


The Regulation defines "sustainability risk" as "an environmental, social or governance event or condition that, if it occurs, could cause a negative material impact on the value of the investment".

It also defines a "sustainable investment" as "an investment in an economic activity that contributes to an environmental objective, as measured, for example, by key resource efficiency indicators on the use of energy, renewable energy, raw materials, water and land, on the production of waste, and greenhouse gas emissions, or on its impact on biodiversity and the circular economy, or an investment in an economic activity that contributes to a social objective, in particular an investment that contributes to tackling inequality or that fosters social cohesion, social integration and labour relations, or an investment in human capital or economically or socially disadvantaged communities, provided that such investments do not significantly harm any of those objectives and that the investee companies follow good governance practices, in particular with respect to sound management structures, employee relations, remuneration of staff and tax compliance".

Targeted participants and products

By "financial market participants", the Regulation refers to the following participants:

  • an insurance company offering insurance-based investment products
  • an investment firm providing portfolio management services
  • an institution for occupational retirement provision (IORP) or a manufacturer of a pension product or a provider of pan-European personal pension products (PEPP)
  • an alternative investment fund manager (AIFM), a manager of a venture capital fund, a manager of a social entrepreneurship fund, a management company of an undertaking for collective investment in transferable securities (UCITS)

The Regulation also addresses financial advisers, i.e. all players who, without directly investing the capital entrusted to them by their clients on the market, provide the service of investment advice and thus distribute the financial products created by the former.

By "financial product", the regulation refers to the following products:

  • a portfolio of financial assets managed on behalf of a client
  • a UCITS or an alternative investment fund (AIF)
  • an insurance-based investment product (IBIP), such as life insurance
  • a pension product, a pension scheme or a PEPP

Methods of implementation

The Regulation endeavours to describe the different ways in which this overall objective of transparency is implemented and the information that should typically be made public. It should be noted that the Regulation does not go into the details of the information to provide; this will be taken into account in the technical standards currently being developed by the regulatory authorities (ESMA, EBA, EIOPA).

"Ex ante" transparency for financial actors and products

The Regulation provides for an obligation on the part of actors to publish "ex ante" information, for example, at organisation level:

  • Information on their policies regarding the integration of sustainability risks into their investment decision-making process or investment advice
  • If they take into account the adverse impacts of investment decisions on sustainability factors:
    • Information on their policies for identifying and prioritizing sustainability risks and associated indicators
    • a description of the principal adverse sustainability impacts and the actions taken in this regard
    • A brief summary of engagement policies (see definition in insert below)
    • a reference to their adherence to responsible business conduct codes and internationally recognised standards for due diligence and reporting and, where relevant, the degree of their alignment with the objectives of the Paris Agreement.
  • If they do not take into account adverse impacts:
    • Clear information on the reasons why they do not do so, including, where relevant, information on whether and when they intend to take these adverse impacts into account.

Engagement policies: describes how institutional investors and asset managers monitor investee companies on relevant issues (including strategy, financial and non-financial performance and risk, capital structure, social and environmental impact and corporate governance), interact with investee companies, exercise voting and other rights attached to shares, cooperate with other shareholders, communicate with relevant stakeholders in investee companies and manage actual or potential conflicts of interest in relation to their engagement.

Similarly, in terms of financial products, the Regulation provides for transparency rules in pre-contractual or commercial information such as:

  • Where a financial product promotes environmental or social characteristics:
    • Information on how these characteristics are met
    • If an index is used as a reference bookmark, information on why that index is suitable for the characteristics in question and where information on how that index is calculated can be found
  • Where a financial product has sustainable investment as its objective:
    • Choice of the benchmark index, appropriateness of this index, method of calculation,
    • If there is no benchmark index, an explanation of how the sustainable development goal is being achieved by the product in question
  • And for any financial product marketed or advised:
    • A clear and reasoned explanation of whether, and, if so, how a financial product considers principal adverse impacts on sustainability factors
    • The results of the assessment of the likely impact of sustainability risks on the performance of the financial products

"Ex post" transparency

Ex-post transparency concerns the way in which the actor has achieved its objectives in terms of sustainability management or sustainability risk integration, or the way in which the financial products distributed have reacted to sustainability risks during the past financial year.

With regard to financial products, ex post transparency requires the publication of:

  • For a financial product that promotes environmental and social characteristics, the extent to which these characteristics have been met
  • For a financial product whose objective is sustainable investment:
    • the overall sustainability-related impact of the financial product by means of relevant sustainability indicators; or
    • where an index has been designated as a reference benchmark, a comparison between the overall sustainability-related impact of the financial product with the impacts of the designated index and of a broad market index through sustainability indicators.

Information dissemination methods

The Regulation provides for the dissemination of information on the websites of the actors concerned, but also on different media such as "pre-contractual disclosures". The document does not specify this, but it can be assumed that this covers prospectuses for financial products as well as any pre-contractual documentation given to the customer before signing a contract or subscribing to a financial product.

In addition, actors shall ensure that their marketing communications do not contradict the information disclosed pursuant to this Regulation. They shall also ensure that this information is regularly updated in the various communication media.

As far as ex-post information is concerned, the Regulation refers mainly to the various annual reports produced by the actors.