The Climate Benchmarks Regulation will bring consistency and clarity to the market for low carbon benchmarks by setting out requirements for ‘Paris-Aligned’ and ‘Climate-Transition’ benchmarks.
The Commission has prepared three draft Delegated Acts to provide more clarity and detail regarding certain provisions. However, these were only published for consultation on 8th April, while, some of the obligations set out in the Climate Benchmarks Regulation are due by 30th April. This created a challenging situation for benchmarks administrators. FESE therefore very much welcomes the opinion from ESMA on 29th April stating that NCAs should not prioritise supervisory or enforcement action against administrators regarding these new requirements until the Delegated Acts apply and the opinion addressed to the Commission stating that any delay in the adoption of the Delegated Acts should be avoided.
In terms of substance, the draft Delegated Acts should be clarified regarding if administrators need to report on all ESG factors listed or just those deemed relevant. It should be set out that an administrator may state that a benchmark is not aligned with the target of reducing carbon emissions or the attainment of the objectives of the Paris Agreement. In this case, no further information on the degree of alignment with reducing carbon emissions would need to be disclosed. FESE has concerns that some of the proposed elements in the draft Delegated Acts are not defined. Without guidance, the risk of divergent application is apparent which would be contrary to the goal of promoting transparency and comparability for investors.