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Sustainability


European Regulatory Agenda

At European level, the European Commission has since 2018 been developing a comprehensive policy agenda on sustainable finance, comprising the "Action Plan: Financing Sustainable Growth", published on 8 March 2018, and a Renewed Sustainable Finance Strategy adopted on 6 July 2021.

In the 2018 Action Plan, the Commission presented a strategy for a financial system that supports the EU's climate and sustainable development agenda, aiming at re-orienting private capital to finance the green transition. The Action Plan included actions covering all relevant actors in the financial system:

  • establishing a taxonomy (common language) for sustainable finance;
  • creating EU labels for green financial products;
  • clarifying the duty of asset managers and institutional investors to take sustainability into account in the investment process and enhancing disclosure requirements;
  • requiring insurance and investment firms to advise clients on the basis of their sustainability preferences;
  • incorporating sustainability in prudential requirements;
  • enhancing transparency in corporate reporting.

On July 2021, the Renewed Strategy increased the level of ambition, after the foundations of sustainable finance in the EU having been established under the 2018 Action Plan and in the context of sustainability being the central feature of the EU's recovery from the COVID-19 pandemic. The Strategy presents six sets of actions to tackle environmental challenges, while increasing investment in the EU's transition towards a sustainable economy:

  • extend the existing sustainable finance toolbox to facilitate access to transition finance;
  • improve the inclusiveness of small and medium-sized enterprises (SMEs), and consumers, giving them tools and incentives to access transition finance;
  • enhance the resilience of the economic and financial system to sustainability risks;
  • increase the contribution of the financial sector to sustainability;
  • ensure the integrity of the EU financial system and monitor its orderly transition to sustainability;
  • develop international sustainable finance initiatives and standards and support EU partner countries.

The inclusion of sustainability factors has already resulted in several legislative proposals, namely on disclosure of non-financial information, shareholders' rights and rules for asset managers and institutional investors, benchmarks, sustainability-related disclosures, taxonomy, consideration of sustainability factors, risks and preferences in the context of the Directives on markets for financial instruments (MiFID II), alternative investment managers (AIFMD) and collective investment undertakings (UCITS) and Green Bonds.

See below the legislative initiatives and the dates of their application.


DISCLOSURE OF NON-FINANCIAL INFORMATION

Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014, amending Directive 2013/34/EU[1] as regards disclosure of non-financial and diversity information by certain large undertakings and groups (Non-Financial Reporting Directive, NFRD)[2], was transposed into the Portuguese legal system by Decree-Law 89/2017 of 28 July, applicable to financial years starting on or after 1 January 2017.

The duty to disclose information imposed by the Directive, applicable to large undertakings (or parent undertakings of large groups) which are "public-interest entities"[3] and that exceed an average number of 500 employees during the financial year (in the case of parent undertakings of large groups, on a consolidated basis), aims at reinforcing transparency and consistency of non-financial information. Non-financial statements shall contain information to the extent necessary for an understanding of the undertaking's development, performance, position and impact of its activity, relating to, as a minimum, environmental, social and employee matters, respect for human rights, anti-corruption and bribery.

In this context, on 2 February 2021 CMVM made available a non-binding reporting template for the disclosure of non-financial information by issuers of securities admitted to trading, particularly in respect of information on environmental, social and governance (ESG) factors.

Within the scope of the "Action Plan: Financing Sustainable Growth", published on 8 March 2018, the European Commission presented a proposal for a "Taxonomy Regulation". As described in more detail below, the Regulation, published on 22 June 2020, introduced new requirements for the non-financial statement to be published under NFRD.

On 21 April 2021 (and as announced in its European Green Deal), the Commission adopted, in the context of a new sustainable finance package, a proposal for a Corporate Sustainability Reporting Directive (CSRD), amending the NFRD. Among other changes, the proposal:

-  extends the scope of the sustainability reporting obligations;

changes the sustainability reporting requirements in the NFRD, including by extending their application to all large companies and all companies with securities admitted to trading on EU regulated markets, except micro-companies, clarifying the principle of double materiality, specifying in greater detail the information that companies should disclose (which will include qualitative and quantitative, and forward-looking and retrospective, information, as well as information that covers short, medium and long-term time horizons);

- aligns the collective responsibility of the members of the administrative, management and supervisory bodies with the revised sustainability reporting requirements, including by requiring them to ensure that the company reports in accordance with the reporting standards;

- requires auditors to perform a limited assurance engagement on a company's sustainability reporting and requires Member States to ensure that consistent requirements are set out for all persons and firms who are allowed to provide the opinion on the assurance of sustainability reporting; the Commission also proposes to amend the Audit Directive[4], in relation to this new requirement.

    

  

SHAREHOLDER RIGHTS

Directive (EU) 2017/828 of the European Parliament and of the Council of 17 May 2017, amending Directive 2007/36/EC[5] as regards the encouragement of long-term shareholder engagement (Shareholder Rights Directive II), reinforcing certain shareholders' rights, and seeking to encourage their engagement with the management of companies, with a focus on long-term interests and sustainability, was transposed into the Portuguese legal system by Law 50/2020 of 25 August. The Directive applies since the transposition deadline, 10 June 2019, except for the provisions specified in the Commission Implementing Regulation (EU) 2018/1212 of 3 September 2018, whose transposition deadline was 3 September 2020.

This Directive applies as regards companies whose shares are admitted to trading on a regulated market in the EU. It establishes requirements in order to encourage shareholder engagement in corporate governance of the company, in particular in the long term, which can help improve the company's financial and non-financial performance, including as regards environmental, social and governance factors. Those requirements include transparency obligations for asset managers and institutional investors.

Main changes

    • Elaboration and disclosure of an engagement policy by institutional investors[6] and asset managers[7] describing how they integrate shareholder engagement in their investment strategy and how they monitor investee companies on, among other elements, social and environmental impact and corporate governance; if they choose not to do it, they have to publicly disclose a clear and reasoned explanation. They shall also disclose annually the way in which the engagement policy has been applied.
    • Elaboration and disclosure of a remuneration policy for the members of the administrative, management and supervisory bodies, which shall:
      • contribute to the company's business strategy, long-term interests and sustainability and explain how it does so;
      • set financial and non-financial performance criteria for awarding variable remuneration, including criteria relating to corporate social responsibility, and an explanation of how these criteria contribute to the company's corporate strategy, long-term interests and sustainability;
      • explain how share-based remuneration contributes to the company's corporate strategy, long-term interests and sustainability.
    • Disclosure by institutional investors of how their arrangements with their asset managers incentivise the latter to make investment decisions based on assessments of medium to long-term financial and non-financial performance of the investee company and to engage with the investee companies in order to improve their performance in the medium to long-term;
    • Annual information from the asset manager to the institutional investor on whether and how the asset manager makes investment decisions based on evaluation of medium to long-term performance of the investee company, including non-financial.

       

BENCHMARKS

Following the proposal presented by the Commission, on 24 May 2018, within the "Action Plan: Financing Sustainable Growth"on 9 December 2019 Regulation (EU) 2019/2089 of the European Parliament and of the Council of 27 November 2019, amending Regulation (EU) 2016/1011 of the European Parliament and of the Council (Benchmarks Regulation[8]), was published. The Regulation introduced the requirements for the new "EU Climate Transition Benchmarks" and "EU Paris-aligned Benchmarks", as well as sustainability-related disclosure requirements for benchmarks.

On 17 July 2020, the Commission adopted Delegated Regulations under the Regulation on (i) minimum standards for EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks, (ii) the minimum content of the explanation on how ESG factors are reflected in the benchmark methodology and (iii) the explanation in the benchmark statement of how ESG factors are reflected in each benchmark provided and published, which became applicable on 23 December 2020.


Main changes

    • Creation and establishment of the requirements applicable to new benchmarks:
      • EU climate transition benchmarks, whose underlying assets are selected, weighted or excluded in such a manner that the resulting benchmark portfolio is on a decarbonisation trajectory"[9];
        administrators of EU Climate Transition Benchmarks shall select, weight, or exclude underlying assets issued by companies that follow a decarbonisation trajectory by 31 December 2022;
      • EU Paris-aligned Benchmarks, whose underlying assets are selected, weighted or excluded so that the portfolio's carbon emissions are in line with the objectives of the Paris Agreement.

These requirements must be complied with by the respective administrators by 30 April 2020.

    • Benchmark administrators shall provide an explanation on how the key elements of the methodology used for the benchmark or family of benchmarks reflects ESG factors, for each benchmark or family of benchmarks (except for interest rate and foreign exchange benchmarks), by 30 April 2020.
    • The benchmark statement shall include:
      • by 30 April 2020, an explanation of how ESG factors are reflected in each benchmark or family of benchmarks provided and published and some additional information on ESG objectives and factors;
      • by 31 December 2021, an explanation of how the methodology aligns with the target of carbon emission reductions or attains the objectives of the Paris Agreement (except for interest rate and foreign exchange benchmarks).
    • EU benchmark administrators which provide significant benchmarks determined on the basis of the value of one or more underlying assets or prices shall endeavour to provide one or more EU Climate Transition Benchmarks by 1 January 2022. 


SUSTAINABILITY-RELATED DISCLOSURES IN THE FINANCIAL SERVICES SECTOR (SFDR)

Following the proposal presented by the Commission, on 24 May 2018, within its "Action Plan: Financing Sustainable Growth", on 9 December 2019 Regulation (EU) 2019/2088 of 27 November 2019, on sustainability‐related disclosures in the financial services sector (SFDR[10]), was published. The Regulation establishes rules, for financial market participants[11] and financial advisers[12], on transparency with regard the integration of sustainability risks and the consideration of adverse sustainability impacts in their processes, as well as the provision of sustainability‐related information with respect to financial products[13]. It was already amended by the "Taxonomy Regulation".

The Regulation will be supplemented by various regulatory technical standards (RTS), on the following matters:

  • content and presentation of the information in relation to the principle of "do no significant harm" (this mandate was introduced only in 2020, by the "Taxonomy Regulation") and details of the presentation and content of the information to be disclosed by financial market participants, in pre-contractual disclosures, on their websites and in periodic reports, in relation to financial products that: i) promote environmental or social characteristics, or a combination of both; and ii) have sustainable investment as their objective.
On 6 April 2022, the Comission presented a proposal for a Delegated Regulation supplementing Regulation (EU) 2019/2088 of the European Parliament and of the Council on these matters. The proposed Delegated Regulation establishes a mandatory reporting template to describe how principal adverse impacts on sustainability factors are taken into consideration in investment decisions, thereby ensuring comparability among different financial market participants.
  • content, methodologies and presentation of information to be disclosed on websites concerning sustainability indicators in relation to adverse impacts of investment decisions or investment or insurance advice on the climate and other environment-related adverse impacts and in the field of social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters;

    On 2 February 2021, the European Supervisory Authorities published their Final Report on RTS under the SFDR. In its Renewed Sustainable Finance Strategy adopted on 6 July 2021, the Commission commits to engage with the ESAs to review such RTS before December 2022.

    The SFDR is applicable since 10 March 2021, with the following exceptions:

    • the obligation of large financial market participants (exceeding the average number of 500 employees during the financial year, or which are parent undertakings of a large group exceeding such number on a consolidated basis) to publish and maintain on their websites a statement on their due diligence policies with respect to the principal adverse impacts of investment decisions on sustainability factors is applicable since 30 June 2021;
    • the requirements on transparency of the promotion of environmental or social characteristics and of sustainable investments in periodic reports will be applicable as from 1 January 2022;
    • the additional disclosure requirements (introduced by the "Taxonomy Regulation"), as regards environmentally sustainable investments and financial products that promote environmental characteristics, of the environmental objective(s) to which the investment underlying the financial product contributes and of a description of how and to what extent that investment is in economic activities that qualify as environmentally sustainable, will be applicable:
      • as from 1 January 2022, regarding the environmental objectives of climate change mitigation and climate change adaptation;

      • as from 1 January 2023, regarding the environmental objectives of the sustainable use and protection of water and marine resources, the transition to a circular economy, pollution prevention and control and the protection and restoration of biodiversity and ecosystems;

    • the requirements of disclosure as regards adverse impacts on sustainability factors at financial product level will be applicable as from 30 December 2022.
    On 13 May 2022, the Comission issued a decision on the adoption of the answers to be provided to questions submitted by the European Supervisory Authorities concerning Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector and Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment. The answers were published on ESMA's website on 25 May. 

    Main changes

    • Definition of sustainable investment relevant to the financial sector.
    • Disclosures  on websites:
    • policies on the integration of sustainability risks in the investment decision-making process or in the investment or insurance advice;
    • adverse impacts on sustainability factors at entity level;
    • information on how remuneration policies are consistent with the integration of sustainability risks and inclusion of that information in the remuneration policy;
    • of the promotion of environmental or social characteristics and of sustainable investments.
    • Precontractual disclosures, including of:
    • how sustainability risks are integrated in investment decisions or investment or insurance advice;
    • the results of the assessment of the likely impacts of sustainability risks on the returns of the financial products;
    • adverse sustainability impacts at financial product level;
    • promotion of environmental or social characteristics and sustainable investments.
    • Disclosure of the promotion of environmental or social characteristics and of sustainable investments in periodic reports.
    • Differentiation of financial products:
    • financial products that promote, inter alia, environmental or social characteristics, or a combination of both;
    • financial products that have sustainable investments as objective; and
    • other financial products.
    • Duty to ensure that marketing communications do not contradict the information disclosed under the SFDR.


    Corporate Sustainability Due Diligence (CSDD)

    On 23 February 2022, the Commission adopted a proposal for a Directive on corporate sustainability due diligence, amending Directive (EU) 2019/1937. This proposed Directive complements, among others, the NFRD, the CSRD, the SFDR and the Taxonomy Regulation.

    The due diligence duty imposed by the proposed Directive applies to:

      • companies incorporated under the law of a member state, which have (i) more than 500 employees and net worldwide turnover exceeding €150 million; or (ii) more than 250 employees and net worldwide turnover exceeding €40 million, provided that at least 50% is generated by defined high-impact sectors (e.g., agriculture, textiles, or minerals).
      • companies not incorporated under the law of a member state if they have a net turnover in the EU (i) exceeding 150 million euros; or (ii) between 40 and 150 million euros, with the 50% indicator mentioned above.

    The criteria set forth in (ii) above shall apply two years after the Directive starts applying.

    This proposed Directive focuses on establishing obligations, as well as identifying, preventing, and mitigating actual or potential adverse impacts and measuring responsibilities regarding the behaviour of these companies, their subsidiaries and the rest of the value chain, with respect to environmental and human rights considerations. Among other aspects, this proposal determines the:

    - integration of due diligence measures into company policies, together with monitoring of their effectiveness and public reporting of adverse impacts and measures taken;

    - adoption of appropriate measures by companies for the identification, prevention and mitigation of actual or potential adverse consequences related to human rights and the environment;

    - the possibility for persons and certain organisations to submit complaints to companies where there are legitimate concerns about actual or potential adverse human rights or environmental impacts;

    - implementation of a plan consisting of measures compatible with the transition to a sustainable economy, including the 1.5°C global warming limit set by the Paris Agreement;

    - establishment of duties on the part of company directors with regard to the development and supervision of the due diligence process.


    TAXONOMY

    Following the proposal presented by the Commission, on 24 May 2018, within the scope of its 2018 Action Plan, on 22 June 2020 Regulation (EU) No 2020/852 of the European Parliament and of the Council of 18 June 2020, on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 (Taxonomy Regulation), was published.

    The Regulation is to be supplemented by several delegated acts:

    • Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021, which establishes technical screening criteria to determine the conditions under which an economic activity qualifies as contributing substantially to climate change mitigation or climate change adaptation and whether that economic activity causes no significant harm to any of the other environmental objectives, was published on 9 December 2021 and applies as from 1 January 2022.

    • On 9 March 2022, the Commission presented a Taxonomy Complementary Climate Delegated Act on climate change mitigation and adaptation covering certain gas and nuclear activities.  It will enter into force if no objection is expressed either by the European Parliament or by the Council within a period of four months, extendable by two more months.
    • Commission Delegated Regulation (EU) 2021/2178 of 6 July 2021, which specifies the content and presentation of information to be disclosed by undertakings subject to the obligation to publish non-financial statements under NFRD concerning environmentally sustainable economic activities and the methodology to comply with that disclosure obligation, was published on 10 December 2021 and will apply progressively between 1 January 2022 and 1 January 2026. In December 2021, the Commission published FAQs on this Delegated Regulation, which were updated in January 2022; on 2 February 2022, the Commission adopted a draft notice on the interpretation of certain provisions of the Regulation.
    By 30 December 2021, the Commission should adopt a delegated act establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to one of the other environmental objectives set in the Taxonomy Regulation.

    The obligations introduced by the Taxonomy Regulation will apply:

    • as from 1 January 2022, concerning the environmental objectives of climate change mitigation and climate change adaptation, and
    • as from 1 January 2023, concerning the other environmental objectives.

    Main changes

    • Establishment of a unified language (classification system or taxonomy) to identify economic activities that qualify as sustainable, based on six environmental objectives (rather than establishing specific environmentally sustainable financial products).
    • Definition of the criteria according to which an economic activity qualifies as environmentally sustainable, namely to what extent it:
      • contributes substantially to one or more of the environmental objectives:
        • climate change mitigation;
        • climate change adaptation;
        • the sustainable use and protection of water and marine resources;
        • the transition to a circular economy;
        • pollution prevention and control;
        • the protection and restoration of biodiversity and ecosystems;
        • does not significantly harm any of those objectives;
      • is carried out in compliance with minimum safeguards, i.e., with procedures implemented by an undertaking to ensure the alignment of its economic activity with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight fundamental conventions identified in the Declaration of the International Labour Organisation on Fundamental Principles and Rights at Work and the International Bill of Human Rights;
        • meets the technical screening criteria for environmental objectives defined in delegated acts.
      • Obligation, for the Member States and the EU, of using the criteria set in the Regulation to determine whether an economic activity qualifies as environmentally sustainable for the purposes of any public measures, standards and labels setting our requirements in respect of financial products or corporate bonds that are made available as environmentally sustainable.
      • Transparency requirements, for market participants that make available financial products, in pre-contractual disclosures and in periodic reports:
        • regarding financial products which invest in an economic activity that contributes to an environmental objective, information on the environmental objective(s) to which the investment underlying the financial product contributes and a description of how and to what extent that investment is in economic activities that qualify as environmentally sustainable;
        • regarding financial products that promote environmental characteristics, information identical to that mentioned in the previous point and a statement on the scope of the principle of "do no significant harm"[14];
        • for other products, a statement on the underlying investments not taking into account the EU criteria applicable to environmentally sustainable economic activities.
      • Further requirements for non-financial statements under the NFRD:
        • how and to what extent the undertaking's activities are associated with economic activities that qualify as environmentally sustainable;
        • for non-financial undertakings, in particular the proportion of their (i) turnover resulting from products or services associated with economic activities that qualify as environmentally sustainable and (ii) capital and operating expenditure related to assets or processes associated with such economic activities. 
           

    Social Taxonomy

    On 28 February 2022, the Platform for Sustainable Finance published the Final Report on Social Taxonomy, on the inclusion of the social taxonomy into the existing EU taxonomy (at environmental level), proposing a structure in line and, partly, in common with the current EU legislative context, so as not to burden companies. .

    This social taxonomy is proposed in the current European regulatory framework on sustainable finance and corporate governance, namely: the taxonomy regulation, the CSRD, the SFDR and the sustainable corporate governance initiative.

    This taxonomy aims to develop social goals by defining more clearly what constitutes social investment and which activities contribute to meeting these social goals, directing the flow of capital to activities that operate with respect for human rights and promote better working conditions.

    Three objectives are proposed for the social taxonomy, depending on the type of stakeholders involved:

      • Decent work - for the workers of the company and the value chain;
      • Adequate living standards and well-being - for end users/consumers;
      • Inclusive and sustainable communities and societies - for the affected communities (directly or indirectly/through the value chain).

    These goals are divided into sub-goals that take into account factors such as health, safety, housing, wages, and non-discrimination.

    Within each objective, there are three types of substantial contributions:

    (i) additional social benefits inherent in the activity itself (e.g., research and marketing of pharmaceuticals);

    (ii) avoiding and addressing negative impacts on workers, consumers and communities (e.g., occupational health and safety; training workers for a fair transition; paying wages agreed in collective bargaining; ensuring a decent life for the worker and his/her family);

    (iii) support activities that support other activities to provide social benefits.

    The principle of "do no significant harm" is a structural element of this social taxonomy, which also takes into account socially harmful activities.

    These suggestions are not binding on the Commission, and the Commission will decide whether and how the social taxonomy will be developed, pending the publication of the Commission report at this level.


    MiFID/AIFMD/UCITS

    Also in the context of the 2018 Action Plan, Delegated Regulations and Directives integrating sustainability considerations in the rules applicable to investment firms and managers of UCITS and of alternative investment funds (AIFs) were published on 2 August 2021:


    Main changes

    • Organisational requirements: investment firms and AIFs and UCITS managers are required to consider sustainability risks when complying with general organisational requirements (e.g. of employing personnel with the necessary skills, knowledge for the effective integration of sustainability risks and adequacy of decision-making procedures), namely in the following areas:
      • risk management [MiFID II, AIFMD and UCITS]: risk management policies and procedures will be implemented to assess the exposure to / consider sustainability risks;
      • the identification of conflicts of interest now considers the integration of sustainability risks [AIFMD and UCITS] and the sustainability preferences of investors [MiFID II];
      • internal control mechanisms [AIFMD and UCITS]: the senior management shall now integrate sustainability risks in the control activities for which it is responsible.

    • Due diligence [AIFMD and UCITS]: when complying with the duty to apply a high standard of diligence in selecting and monitoring investments, managers shall now take into account sustainability risks, and, where applicable, principal adverse impacts of investment decisions.

    • Suitability assessment [MiFID II]: in the context of investment advice or portfolio management, the suitability assessment will now consider the investor's sustainability preferences; moreover, for investment advice, the report that explains how the recommendation provided is suitable for the retail client shall include a justification of how it meets the investor's sustainability preferences.
    • Product governance [MiFID II]: investment firms manufacturing or distributing financial instruments will start to consider sustainability preferences and related objectives when defining and revising the target market (with which the distribution strategy has to be compatible). 

               

    GREEN BONDS

    On 6 July 2021, within its Renewed Sustainable Finance Strategy published on the same date, the Commission adopted a legislative proposal for a European green bond standard (EUGBS).

    The Regulation will set a voluntary standard for the issuance of "European green bonds" (EuGB), available to all issuers, to help attract financing for sustainable projects and thus supporting issuers in transitioning. The proposal:

    • sets the conditions for the use of the designation EuGB – requirements
      • related with the bonds (in particular, the use of proceeds has to be taxonomy aligned) and
      • of transparency and external review (aiming at ensuring full transparency on the allocation of EuGB's proceeds and an external validation of the taxonomy-alignment),

    whose supervision is proposed to belong to the competent authorities designated under the Prospectus Regulation[20];

    • introduces a framework for external reviewers of EuGB, which covers the conditions for taking up the activity (for which a registration with ESMA is necessary) and the requirements for conducting such activity (organizational requirements, processes and documents concerning governance, and requirements concerning the pre- and post-issuance reviews), as well as the provision of services by third-country reviewers; ESMA is proposed to be competent to supervise compliance with such requirements.




    ____________________________

    [1] Consolidated version, with the changes introduced by Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 and Directive 2014/102/EU of 7 November 2014.

    [2] On 5 July 2017, as provided for in the NFRD, the European Commission published a communication with guidelines on the non-financial reporting (methodology for reporting non-financial information), including key performance indicators, general and sectoral. On 20 June 2019, the European Commission published additional guidelines on reporting of climate-related information.

    [3] According to Article 2(1) of Directive 2013/34/EU, (i) issuers of transferable securities admitted to trading on a regulated market, (ii) credit institutions, (iii) insurance undertakings and (iv) other undertakings designated by Member States as public-interest entities, for instance undertakings that are of significant public relevance because of the nature of their business, their size or the number of their employees.

    [4] Consolidated version, with the changes introduced by Directive 2008/30/EC of the European Parliament and of the Council of 11 March 2008, Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 and Directive 2014/56/EU of the European Parliament and of the Council of 16 April 2014.

    [5] Consolidated version, with the changes introduced by Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 and Directive (EU) 2017/828 of the European Parliament and of the Council of 17 May 2017.

    [6] According to Article 2(e) of the Shareholder Rights Directive, undertakings carrying out activities of life insurance or of reinsurance, provided that those activities cover life-insurance obligations, and institutions for occupational retirement provision.

    [7] According to Article 2(f) of the Shareholder Rights Directive, an investment firm that provides portfolio management services, an alternative investment fund manager or a management company of a UCITS or an investment company authorised in accordance with the UCITS Directive that has not designated a management company for its management.

    [8] Consolidated version, with the changes introduced by Regulation (EU) 2019/2089 of the European Parliament and of the Council of 27 November 2019 and Regulation (EU) 2021/168 of the European Parliament and of the Council of 10 February 2021.

    [9] According to Article 3(23c) of the Benchmarks Regulation, a measurable, science-based and time-bound trajectory towards alignment with the objectives of the Paris Agreement by reducing carbon emissions.

    [10] Consolidated version, with the changes introduced by the Taxonomy Regulation.

    [11] According to Article 2(1) of SFDR, insurance undertakings which make available insurance‐based investment products (IBIPs), investment firms which provide portfolio management, institutions for occupational retirement provision, manufacturers of pension products, alternative investment fund managers, pan‐European personal pension product (PEPP) providers, managers of European venture capital funds, managers of European social entrepreneurship funds, management companies of undertaking for collective investment in transferable securities (UCITS) and credit institutions which provide portfolio management.

    [12] According to Article 2(11) of SFDR, insurance intermediaries and insurance undertakings which provide insurance advice with regard to IBIPs and credit institutions, investment firms, alternative investment funds managers and UCITS management companies which provide investment advice.

    [13] According to Article 2(12) of SFDR, portfolio management, alternative investment funds, insurance-based investment products, pension products, pension schemes, UCITS and PEPP.

    [14] Principle provided for in Article 2(17) of SFDR as an integral part of the definition of sustainable investment.

    [15] Consolidated version, with the changes introduced by Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014, Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016, Directive (EU) 2016/1034 of the European Parliament and of the Council of 23 June 2016, Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019 and Regulation (EU) 2019/2115 of the European Parliament and of the Council of 27 November 2019.

    [16] Consolidated version, with the changes introduced by Commission Delegated Regulation (EU) 2017/2294 of 28 August 2017, Commission Delegated Regulation (EU) 2019/1011 of 13 December 2018, Commission Delegated Regulation (EU) 2021/527 of 15 December 2020 and Commission Delegated Regulation (EU) 2021/1254 of 21 April 2021.

    [17] Consolidated version, with the changes introduced by Directive 2010/78/EU of the European Parliament and of the Council of 24 November 2010, Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011, Directive 2013/14/EU of the European Parliament and of the Council of 21 May 2013, Directive 2014/91/EU of the European Parliament and of the Council of 23 July 2014, Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017, Directive (EU) 2019/1160 of the European Parliament and of the Council of 20 June 2019, Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019 and Directive (EU) 2019/2162 of the European Parliament and of the Council of 27 November 2019.

    [18] Consolidated version, with the changes introduced by Directive 2013/14/EU of the European Parliament and of the Council of 21 May 2013, Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014, Directive (EU) 2016/2341 of the European Parliament and of the Council of 14 December 2016, Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017, Directive (EU) 2019/1160 of the European Parliament and of the Council of 20 June 2019 and Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019.

    [19] Consolidated version, with the changes introduced by Commission Delegated Regulation (EU) 2018/1618 of 12 July 2018.

    [20] Consolidated version, with the changes introduced by Regulation (EU) 2019/2115 of the European Parliament and of the Council of 27 November 2019 and Regulation (EU) 2021/337 of the European Parliament and of the Council of 16 February 2021.