Climate Change, Corruption and Child Labour – FMA publishes cross-sector Guide for Managing Sustainability Risks
The Austrian Financial Market Authority (FMA) has today published a cross-sector Guide for Handling Sustainability Risks (“Leitfaden zum Umgang mit Nachhaltigkeitsrisiken”). Sustainability risks are to be understood as environmental, social and governance risks (ESG risks). The range of issues addressed spans from climate change via corruption through to child labour. Such risks may – and not only in the case of climate risks – negatively influence the performance of individual assets or financial market participants and may also potentially endanger financial stability. The FMA Guide should generally serve as guidance for supervised entities in the consideration of sustainability risks within the scope of their business activities, and should in particular also prepare them for regulatory developments, such as the application of the Disclosure Regulation. Accordingly, the Guide is a living document that will be updated as necessary.
Strengthening Common Regulatory Understanding
“The purpose of the Guide is to increase the common understanding between the FMA and supervised entities and to ensure a level playing field between the supervised entities,” remarked the FMA’s Executive Directors, Helmut Ettl and Eduard Müller: “The Guide is cross-sector and addresses banks, insurance companies, asset managers, Pensionskassen and occupational severance and retirement funds. They are all required to consider sustainability risks in the existing risk categories, in their strategy and governance, as well as to the greatest possible extent in existing transparency obligations.” Furthermore, the Guide also contains two in-depth Annexes, the first on “Good Practices”, the second on other sources of information. Demonstrative examples contain explanations that are of practical relevance.
The Guide is also intended for guidance about the handling the various initiatives taken by European institutions to integrate ESG risks into European legislation. On 8 June 2020 the European Commission published draft amendments to delegated acts in relation to MiFID II, the UCITS Directive, AIFMD, IDD and Solvency II, which contain obligations for the integration of sustainability risks (general organisational requirements as well as requirements for the risk management function). The Disclosure Regulation in particular contains new cross-sector transparency obligations for financial market participants and financial advisers: In the future, information will inter alia be required to be published on the company’s website about the integration of sustainability risks at enterprise level as well as a description of the integration of sustainability risks and their potential impacts to be included in pre-contractual information of financial products. In addition, following its publication in the Official Journal of the European Union on 22 June 2020, the Taxonomy Regulation  entered into force. The Taxonomy Regulation creates a classification system for simplifying ecologically sustainable investments.
The FMA Guide for Handling of Sustainability Risks was drawn up in close cooperation with the “Green Finance” focus group from the Federal Ministry of Finance (BMF), and the Federal Ministry for Climate Action, Environment, Energy, Mobility, Innovation and Technology (BMK), as well as the Environment Agency Austria (UBA) and the Oesterreichische Nationalbank (OeNB). It attracted considerable interest during the consultation process from enterprises, stakeholder groups and NGOs, with many of their comments taken into account in the final version of the Guide.
This FMA Guide can be downloaded on the FMA website.
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 Directive 2014/65/EU on markets in financial instruments.
 Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS).
 Directive 2011/61/EU on Alternative Investment Fund Managers.
 Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on Insurance Distribution
 Directive 2009/138/EG of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II)
 Regulation (EU) 2019/2088 of the European Parliament and of the Council on sustainability‐related disclosures in the financial services sector.
 Generally applicable from 10.3.2021.
 Regulation (EU) 2020/852 of the European Parliament and of the Council on the establishment of a framework to facilitate sustainable investment.