In its Action Plan 2018: Financing Sustainable Growth1, the EU Commission set out goals and timing to booster the role of finance towards an economy that focuses on ESG goals2, in compliance with the Paris Agreement on climate changes3 and the UN 2030 Agenda for Sustainable Development4.

The afore-said Action Plan was aimed at orienting capital flows towards sustainable investments, managing financial risks resulting from climate change, as well as enhancing transparency and long-term vision in economic and financial activities.

Moreover, the establishment of a EU system for sustainable activities, as well as the introduction of asset managers' and institutional investors' obligation to consider and disclose sustainability in their investment processes were indicated therein as a key tool for pursuing the above mentioned goal.

To this end, last year the Taxonomy Regulation5 and the Sustainable Finance Disclosure Regulation ("SFDR")6 were adopted, which constitute the pillars of EU sustainable finance.

Taxonomy Regulation aims at harmonising the criteria that financial market participants (e.g., insurance companies, alternative investment fund managers, investment companies and portfolio managers) must meet in order to be able to label financial products marketed as eco-sustainable. The underlying rationale being to encourage both cross-border fundraising and cross-border sustainable investments in the EU.

SFDR lays down harmonised rules on sustainability issues, thus enabling end-investors to make informed and responsible decisions.


For the purpose of providing financial market participants and financial advisors (together, the "Financial Operators") with clear indications for complying with the new transparency obligations, in light of the proportionality principle, the above mentioned regulations have laid down a specific fulfilment time frame, described as follows:

  1. as from 10 March 2021, Financial Operators must disclose, on their website, information about (i) policies on the integration of sustainability risks into their investment decision-making processes, (ii) adverse impacts of investment decisions on sustainability factors, (iii) remuneration policies consistent with the above integration, and (iv) ESG characteristics promoted through the financial products offered (the so-called "light green product"), or any sustainable investment goals that such products aim at pursuing (the so-called "dark green product"). Moreover, Financial Operators must explain, in their pre-contractual disclosure, (i) how sustainability risks are integrated in their investment decisions, (ii) how ESG characteristics are met for light green products, and (iii) for dark green products, how the index drawn as reference benchmark is consistent with such products' investment objective or how, in the absence of a benchmark, such objective is to be attained;
  2. as from 1 January 2022, the afore-said financial market participants (under Taxonomy) will have to specify, in their pre-contractual disclosures and periodic reports, how and to which extent the financial products offered invest in eco-sustainable activities. As a result, investors will be able to easily compare cross-border investments, while the beneficiaries of such investments will be encouraged to draw business models more environmentally sustainable;
  3. as from 1 January 2022, Financial Operators will have to disclose (under SFDR) in their periodic reports, the extent to which ESG characteristics have been achieved for light green products and, for dark green products with a designated index, a comparison between such products' overall sustainability related impact with that of the designated index, as well as of a broad market index through sustainability indicators; and, finally
  4. by 30 December 2022, Financial Operators will have to explain how each financial product offered considers principal adverse impacts on sustainability factors.


3.1. European Supervisory Authorities ("ESAs")' draft regulatory technical standards ("RTS")

On 4 February 2021, ESAs published draft RTS with regard to content, methodologies and presentation of sustainability-related disclosures concerning the adverse sustainability impact of investment decisions on sustainability factors and products7.

As far as the assessment of negative effects on sustainability are concerned, the draft RTS have (i) reduced the number of mandatory universal indicators (i.e., those that will always lead to principal adverse impacts of investment decisions on sustainability, irrespective of the result of the assessment), and (ii) prepared a mandatory template for the statement of the due diligence policy on these effects.

With regard to the fulfilment of transparency obligations at product level, alongside the mandatory templates for pre-contractual information and periodic reports, the draft RTS have specified their content, establishing, for example, that Financial Operators must describe their investment objective and include a list of indicators to measure the achievement of such objective, as well as provide an explanation of the ESG characteristics promoted8.

It is worth mentioning that the RTS, once adopted, will enter into application on 1 January 2022, in order to allow Financial Operators to set up in time the necessary implementing measures, as well as national competent authorities (in Italy, CONSOB) to monitor, in the course of the time, the orderly compliance with the above obligations.

Lately, ESAs have invited Financial Operators to take as a reference in the interim period the draft RTS, even before their final adoption and entry into application9.

3.2. CONSOB's warning and related Q&A upon the SFDR's entry into application

In view of SFDR's entry into application, CONSOB has recently drawn the attention of the Financial Operators upon it, inviting them to supplement their periodic reports (to be filed with CONSOB itself) by an explanation of the measures adopted and the internal control systems put in place to comply with SFDR10.

In the related Q&A, CONSOB has also clarified the scope of product-level pre-contractual disclosures, pointing out that:

  1. Undertakings for Collective Investment in Savings ("UCIs") and insurance-based investment products ("IBIPs") that, as of 10 March 2021, have ongoing offerings, must update their pre-contractual disclosures;
  2. UCIs and IBIPs whose offerings were launched after 10 March 2021 must have drafted pre-contractual disclosure in compliance with SFDR;
  3. Italian UCITS and open non-reserved alternative investment funds ("AIFs") must update the prospectuses, to be sent to CONSOB; and
  4. reserved AIFs managed by Italian alternative investment fund managers must update their offering documentation11.


To achieve a more sustainable growth, every citizen must play his/her own part, and the financial system is no exception.

Taxonomy and SFDR act on the supply side of green financial products. However, it remains to be seen to which extent to the fulfilment of the disclosure obligations introduced by them will contribute to guiding private capital towards sustainable investments, thereby favouring the circular economy.

According to a recently-issued CONSOB's report on the Italian households' investment choices, sustainable and socially responsible investments are still little known12.

This seems to tell us that the "green revolution", initially introduced by the above mentioned regulations, in order to be successful, must act also on the demand side, making investors aware of the importance of an eco-sustainable investment.


1. EU Commission's Action Plan: Financing Sustainable Growth adopted by means of Communication (2018) 97 of 8th March 2018.

2. Environmental, Social and Governance.

3. The Paris Agreement is a legally binding international treaty adopted on 12th December 2015 and entered into force on 4th November 2016.

4. Such Agenda has set out the well-known 17 sustainable development goals (among which, no poverty and hunger, good health and well-being, gender quality and reduced inequalities, climate action, peace, justice and strong institutions, partnerships for achieving these goals).

5. Regulation (EU) 2020/852 of the European Parliament and of the Council on the establishment of a framework to facilitate sustainable investment of 18th June 2020.

6. Regulation (EU) 2019/2088 of the European Parliament and of the Council on sustainability-related disclosures in the financial services sector of 27th November 2020.

7. ESAs's draft RTS on disclosures under SFDR of 4th February 2021.

8. Articles 21 and 58 of the draft RTS.

9. Joint ESAs' Supervisory Statement on the application of the SFDR of 25th February 2021.

10. CONSOB's warning no. 3/21 on first application of SFDR Regulation of 4th March 2021.

11. CONSOB's Q&A on disclosure under SFDR of 4th March 2021.

12. CONSOB's Report on financial investments of Italian households (survey of December 2020).

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