Green Finance
Our sustainability experts at PwC will advise you on every element of sustainable corporate governance – including assessing the various strategic implications of climate change and environmental and social impacts via implementing the requirements for a sustainable financial economy.
We can support you by performing ESG gap analyses, providing recommendations on how to close the gaps and implement new regulatory requirements, providing insight into ESG risks, shaping responsible and sustainable digitalisation, and assisting you as regards the capital market requirements for companies. We will work with you to shape your company's transformation into a sustainable enterprise – for the long-term success of your business.
Sustainable Finance
Sustainable finance encompasses all activities by financial service providers that seek to reduce harm to the environment and climate, promote social engagement and encourage sustainable corporate governance. The Paris Agreement and the EU Action Plan derived from it set out concrete sustainability goals for the financial sector and represent the cornerstone of sustainable finance. Sustainable finance will ensure capital flows to more sustainable investments, and that there is more emphasis on environmental risks and that transparency is encouraged. In this way, the financial services sector will support the transformation of the overall economy and guide it towards sustainability.
This will be realized by extensive changes to disclosure obligations, MiFiD II, and by introducing new rules and regulations such as labelling for green financial products, a standardised EU classification system via the EU Taxonomy and EU standards for non-financial reporting.
Financial service providers will need to work to bring their economic objectives into harmony with the new ESG rules and regulations and change their business models. Financial institutions need to go beyond the regulatory minimum, starting with their own strategy to stand out from the competition and pioneer new business areas.
Our team of experts can support you during your ESG transformation, and help you understand ESG legislative requirements and processes that need to be implemented. Our expertise covers the whole spectrum of potential issues encountered when implementing regulatory requirements. When implementing new regulatory requirements, our clients benefit from PwC’s holistic approach - from developing strategies to integrating them into day-to-day business.
Implementing ESG into institution’s risk management
ECB Guide on climate-related and environmental risks
The European Central Bank (ECB) Guide on climate-related and environmental risks presents the ECB’s expectations on how banks should incorporate climate and environmental risks into their risk culture, risk appetite, risk monitoring framework and loan portfolio management. It also defines the banks’ expected disclosures on ESG matters, in particular Scope 1, 2 and 3 GHG emissions. This guide is mandatory for financial institutions under direct ECB oversight, and optional for other institutions.
EBA Guidelines on loan origination and monitoring
European Banking Authority (EBA) Guidelines on loan origination and monitoring require banks and lending institutions to incorporate ESG risks into their risk management framework and take into account ESG factors when assessing their counterparties in their credit-granting processes. Currently mandatory for credit institutions under direct ECB oversight, after implementation by the National Bank of Slovakia, it will be mandatory for all credit institutions in Slovakia and potentially also for consumer loan providers. EBA Guidelines on loan origination and monitoring are effective from June 2021 for ECB-overseen credit institutions. After NBS transposition into local law the Guidelines will be mandatory for all credit institution and/or consumer lending in Slovakia.
Details of ESG related reporting for Financial Sector
EU Taxonomy
The EU Taxonomy is a framework which classifies green economic activities in order to foster and accelerate sustainable investments. Until the establishment of this framework, investment products and economic activities could be classified as ‘green’ or ‘environmentally sustainable’ without a clear definition of what ‘green’ or ‘sustainable’ meant. The taxonomy’s goal is to solve this issue by providing clear rules on what can be classified as ‘green’ or ‘environmentally sustainable’, in order to mobilize financing for economic activities that contribute to the EU’s environmental objectives.
The application of the EU Taxonomy is extended via delegated acts, which provide additional detail on various aspects of the Taxonomy. Additional delegated acts are expected to be issued in the next few years providing detail on additional topics and amending the law on previous topics via an FAQ process.
For more information on the EU Taxonomy, refer to https://www.pwc.com/sk/en/environmental-social-and-corporate-governance-esg/regulatory-compliance.html
Sustainable Finance Disclosure Regulation (SFDR) - sustainability‐related disclosures in the financial services sector
The SFDR regulation was introduced to improve transparency in the market for sustainable investment products, to prevent greenwashing and to increase transparency around sustainability claims made by financial market participants.
SFDR (together with the Regulatory Technical Standards - RTS) lays down mandatory ESG disclosure obligations for financial market participants and financial advisors with regards to the integration of sustainability risks and the consideration of adverse sustainability impacts in their processes and the provision of sustainability-related information with respect to financial products. It mandates increased transparency and disclosure of ESG characteristics of investment products. RTS increases the details of disclosures required by the SFDR.
SFDR requires financial market participants to disclose to clients and investors how green their financial products are. Under SFDR, financial products must be classified into one of three categories: mainstream, light green or dark green.
The first reporting obligation entered into force on 10 March 2021 and the reporting requirements are continuously being increased.
Pillar III disclosures on ESG
Public disclosure of information relating to risks, capital adequacy, and policies for managing risk with the goal of promoting market discipline (under Part VIII of the Capital Requirements Regulation CRR) are being extended with additional ESG data for systemically important institutions. These requirements entered into force in June 2022.
Amendments to MiFID II
The amendment to the current MiFID II framework seeks to integrate ESG information and sustainability risks into its disclosure requirements and adds an assessment of customers’ ESG preferences to the suitability assessment. The changes clarify the requirement that MiFID investment firms and banks that create and distribute MiFID products must incorporate ESG considerations into organisational requirements, incl. sustainable assessments, risk management, conflicts and product governance arrangements. The amendment entered into force 2 August 2022.
Competitive edge in green investments and sustainable financial products
European Green Bond Standard (EUGBS)
The EUGBS is a voluntary standard proposed to issuers that wish to align with leading best practices in the market. It is designed to be globally relevant and accessible to issuers located within and outside the EU and builds on market best practices, such as the Green Bond Principles.
We can support you with:
- 1. Assistance with positioning
- 2. Impact analysis
- 3. Roadmap and recommendations
- 4. Risk management
- 5. ESG Rating Methodology
- 6. Implementation guidance
- 7. Implementation
1. Assistance with positioning
Description:
- assistance with development of strategic positioning guidance
- concept for target strategic model
Client benefit:
- holistic approach to sustainable finance
- development of shared understanding
2. Impact analysis
Description:
- gap analysis to determine regulatory delta
- assessment of current status of implementation
Client benefit:
- clear understanding of target / actual divergence
- by analysing the regulatory gap, we lay the foundations for subsequent steps (e.g. implementation)
3. Roadmap and recommendations
Description:
- development of concrete recommendations
- prioritisation of identified measures and KPIs
- development of roadmap
Client benefit:
initial implications as basis for decision-making
4. Risk management
Description:
- one of the most challenging topics for financial institutions in relation to sustainability
- design of ESG Risk Management and Control Framework for effective management of ESG risks
Client benefit:
- effective management of ESG risks throughout your organization
5. ESG Rating Methodology
Description:
- developing ESG rating methodologies to comply with requirements
Client benefit:
- support with finding best suitable solution for your business
6. Implementation guidance
Description:
- in-depth analysis of affected organizational units and processes
- translation of defined recommendations into concrete proposals for solutions
- in-depth development of roadmaps, and estimate of work needed
Client benefit:
- deeper understanding of need to make changes
- initial estimate of cost and resources required
7. Implementation
Description:
- assistance with implementation
- technical assistance with pre-defined action areas, including regulatory monitoring
- assumption of project management responsibilities to ensure coordinated, on-time project delivery
Client benefit:
- continuous technical assistance
- access to best practices
- assistance with project management
