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28. 10. 202419:49
ESG Legislation

Delegated Regulation on the introduction of ESG factors in the methodology of reference values 2020/1817

Commission Delegated Regulation (EU) 2020/1817 of 17 July 2020 supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council as regards the minimum content of the explanation of how environmental, social and governance factors are reflected in the benchmark methodology (Text with EEA relevance )

This regulation enters into force on the twentieth day after its publication in the Official Journal of the European Union.

Publication date 3. 12. 2020

This Commission Delegated Regulation extends the existing Regulation (EU) 2016/1011 on indices used as benchmarks. The main objective of this regulation is improve transparency a comparability reference values in terms of environmental, social and governance (ESG) factors.

The regulation introduces the following key requirements for benchmark administrators:

  • Explanation of ESG factors: Administrators must explain which ESG factors they took into account when developing the benchmark methodology. This explanation should include:
    • Which ESG factors are considered
    • How these factors are reflected in the key elements of the methodology, including the selection, weights and metrics of the underlying assets.
    • Data sources and standards used for each ESG factor.
    • Whether ESG objectives are followed.
  • Using the pattern: The regulation provides a specific pattern, which managers should use to explain ESG factors.
  • Update information: Administrators must update regularly information provided to reflect changes in methodology and to indicate the reason for the update.
  • Exceptions: Regulation does not apply to:
    • Commodity reference values.
    • Reference values without underlying assets, which have an impact on climate change (for example, interest rates and exchange rates).

The regulation emphasizes the importance of ESG factors in the investment process and tries to provide investors clearer information on how these factors are taken into account in the reference values. The goal is to support sustainable financing a transition to a low-carbon economy.