On the 29th April 2021, the Malta Financial Services Authority issued a circular informing financial market participants and financial advisors that on the 21st April 2021, the European Commission adopted a package of measures and initiatives related to the EU Sustainable Finance Agenda (the "Package").

By means of the Package, Europe's financial sector is strategically located at the epicentre of the drive to achieve sustainable and holistic economic recovery from the COVID-19 pandemic and the longer-term goal of pursuing the sustainable economic development of Europe.


The Package includes a political communication on directing finance towards the European Green Deal, this being Europe's growth strategy aimed at improving the well-being and health of citizens, making Europe climate-neutral by 2050 and protecting, conserving, and enhancing the European Union's natural capital and biodiversity, and a proposal for a Corporate Sustainability Reporting Directive (the "CSRD"). The proposal aims to reflect the objectives of the European Green Deal as well as enhance the consistency of sustainability (non-financial) reporting requirements within the broader legal framework on sustainable finance. The CSRD also proposes amendments to several pieces of European Union legislation, including the Accounting Directive (Directive 2013/34/EU), the Transparency Directive (Directive 2004/109/EC), the Audit Directive (Directive 2006/43/EC) and the Audit Regulation (Regulation (EU) No 537/2014).

The CSRD Proposal

In brief, the CSRD proposal extends the scope of corporate sustainability reporting to all large companies and all companies listed on EU regulated markets and introduces a general EU-wide audit (assurance) requirement for reported sustainability information. It also permits Member States to allow non-audit firms to assure sustainability information, so called 'independent assurance services providers'.  Furthermore, it introduces more detailed reporting requirements in connection with the firm's management report as well a requirement to report according to a mandatory EU sustainability reporting standard. In this regard, the EU is proposing to devise standards for large companies and separate, proportionate standards for SMEs. The CSRD Proposal also requires companies to prepare their financial statements and their management report in XHTML format and to digitally 'tag' the reported information, according to a digital categorisation system which is to be developed together with the sustainability reporting standards.

The legislative text of the CSRD is now being negotiated between the European Parliament and the Member States in the Council, based on the Commission's proposal.

Delegated Acts

The Package also contains a number of delegated acts proposing to incorporate sustainability into existing financial legislation with respect to sustainability preferences and fiduciary duties. These include UCITS (Directive 2010/43/EU); MIFID II (product governance and sustainability factors) (Delegated Directive (EU) 2017/593); MIFID II (organisational requirements) (Delegated Regulation (EU) 2017/565); AIFMD (Delegated Regulation (EU) No 231/2013); IDD (Delegated Regulations (EU) 2017/2358 and (EU) 2017/2359) and Solvency II (Delegated Regulation (EU) 2015/35). These delegated acts have not yet entered into force as they are subject to the scrutiny period.

The Commission also adopted the final delegated act for climate change mitigation and adaption under the Taxonomy Regulation (Regulation (EU) 2020/852). This delegated act will now be subject to scrutiny by the European Parliament and Council, following which it will be published in the Official Journal and will apply from the 1st January 2022.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.