LONDON (Reuters) – Banks and insurers must comply with a new European Union law on sustainability-related disclosures from March even though detailed guidance on how it should work in practice won’t be ready, the bloc’s executive body said on Friday.
The EU approved the law last year to increase transparency on how banks, insurers, financial advisers and funds consider sustainability risks in their investment decisions and advice to investors.
It includes consideration for cutting carbon emissions, social and employee matters, and respect for human rights. Firms will have to say publicly whether they see risks to sustainability from their investment decisions.
EU insurance, banking and securities regulators had begun working on guidelines for the end of December to implement broad principles sketched out in the law.
The European Commission said in a letter to the regulators published on Friday that the unprecedented economic and market stress caused by the COVID-19 crisis means the December deadline for guidance cannot be met.
“While the delay is unfortunate, it is justified by the need to guarantee sufficient stakeholder involvement in the process given the current difficult circumstances,” said the letter from John Berrigan, head of the EU executive’s financial services unit.
Financial lawyers have said that guidelines are essential for firms to understand what exactly the bloc means by sustainability risk.
But Berrigan said the entry into force of the EU law does not depend on guidelines being ready on time, and therefore the March 10 start date for complying with its high-level requirements will be maintained.
“In order to provide financial market participants and financial advisers adequate time for implementation, the regulatory technical standards will become applicable at a later stage,” Berrigan said.
(Reporting by Huw Jones; Editing by Kirsten Donovan)