On 22 November 2023, the European Securities and Markets Authority (ESMA) published three explanatory notes covering key topics of the Sustainable Finance (SF) framework.

The explanatory notes are purely descriptive and cover:

  • Definition of sustainable investments. This document is intended as an aide to stakeholders to navigate the SF framework concerning the Sustainable Finance Disclosure Regulation (SFDR) definition of sustainable investment and the Taxonomy Regulation definition of environmentally sustainable economic activities.
  • Application of do no significant harm requirements. This document seeks to explain the Do No Significant Harm (DNSH) principle that is embedded in several pieces of SF legislation. The DNSH principle is a key element in the Taxonomy Regulation, SFDR and the Benchmark Regulation.
  • Use of estimates. The purpose of this document is to explain how key SF legislation deal with the use of ‘estimates’ and ‘equivalent information’ and the conditions under which these are allowed as sources of data to prepare mandatory ESG metrics for the compliance of regulated entities with their obligations.

For further updates on regulatory developments in the ESG space please visit our Financial Services Regulatory Developments in ESG hub.