The European Commission published its action plan on sustainable finance in 2018, with the aim of creating a roadmap for sustainable finance across three categories:

  • reorienting capital flows toward a more sustainable economy
  • integrating sustainability into risk management
  • fostering transparency and long-termism.

The European Union has now successfully implemented three major related regulations:

  • Climate Benchmarks Regulation (EU 2019/2089) to enhance the transparency and comparability of benchmark methodologies relating to environmental, social and corporate governance (ESG) metrics, providing investors with clarity on the environmental sustainability of their investments.
  • Sustainable Finance Disclosure Regulation (EU 2019/2088) to re-orient capital flows towards sustainable investments by increasing transparency by financial market participants and advisers on sustainability risks, whilst ensuring a more uniform protection of end investors.
  • Taxonomy Regulation (EU 2020/852) which establishes a harmonised taxonomy to classify financial products as sustainable at EU level, further promoting investments in sustainable activities whilst addressing “greenwashing” concerns.

A range of ESG-related regulatory measures have since been introduced or announced that affect the manner in which companies operate within the European Union. Keeping up with these can pose challenges for companies that must be compliant with the necessary regulations.

Overview of the current and upcoming ESG-related legislation in the EU





Corporate Sustainability Reporting Directive (CSRD)



Amends the reporting requirements of the Non-Financial Reporting Directive (NFRD):

  • extends the scope of mandatory ESG reporting to all large companies and SMEs listed on regulated markets
  • requires external auditing for ESG reports
  • implements mandatory ESG standards with more detailed reporting requirements.

The proposal is not limited to climate and environmental issues, but also to factors related to social and corporate governance, such as equality, human rights and freedom, fair working conditions, business ethics, etc.

Close to finalisation.

Final text subject to European Parliament plenary vote.

Application of the CSRD will take place in three stages, depending on type of company.

EU Green Bonds Regulation (EUGBR)

Aims to set an EU standard for how companies and public authorities can use green bonds to raise funds on capital markets and includes proposals to:

  • clarify the definition of green economic activities based on the Taxonomy Regulation and reduce potential reputational risks for issuers
  • standardise the practice of external review and improve trust in external reviews by introducing a voluntary registration and supervision regime.

The proposal should improve the ability of investors to identify and trust high-quality green bonds.


Final stages of discussion between the Commission, Council and European Parliament.

Current expectations are that market application would start in either 2024 or 2025, depending on the final compromise text.

Corporate Sustainability Due Diligence Directive (CSDDD)

Proposes a horizontal framework to foster the contribution of businesses operating in the single market to respect human rights and the environment by:

  • establishing a corporate due diligence duty for companies to identify, bring to an end, prevent, mitigate and account for negative ESG impacts in their own operations and value chains.
  • introducing duties for directors of EU companies to set up and oversee the implementation of the due diligence process and integrate due diligence into the corporate strategy.

Will affect large EU companies or non-EU companies active in the EU (full scope or targeted scope depending on turnover and number of employees). Small and medium-sized enterprises, including micro-enterprises, are not in scope, but may be impacted as contractors or subcontractors to companies in scope. Companies that have an SME business partner are required to support them to comply with the due diligence measures.


First discussions in Council and European Parliament on the Commission’s proposals.

Application dates will depend on whether a company is in full scope or targeted scope.

Timeline: Expected EU ESG reporting requirements in currently agreed texts (SFDR, Taxonomy and CSRD)[1].




Q3 2022

SFDR: reporting on principal adverse key performance indicators (KPIs) for asset management, insurance and financial advice.

Q1 2023

Taxonomy: transitional KPIs on exercise 2022 – NFRD incorporates information on activities listed for public-interest companies’ reporting of their: i) share of turnover deriving from taxonomy-aligned activities and ii) share of CAPEX and OPEX directed to taxonomy-aligned activities.

Q3 2023

SFDR: reporting on principal adverse KPIs

Q1 2024

CSRD: public-interest companies will have to report KPIs for all 6 environmental objectives (based on 2023 exercise): turnover + CAPEX and OPEX

Q3 2024

SFDR: reporting on principal adverse KPIs (with data coming from CSRD)

Q1 2025

CSRD: large undertakings will have to report KPIs for all 6 environmental objectives (based on 2024 exercise): turnover + CAPEX and OPEX

Q1 2026/

Q1 2028

CSRD: SMEs listed in Regulated Markets will have to report KPIs for all 6 environmental objectives (based on 2024 exercise): turnover + CAPEX and OPEX


Facing the challenge of keeping up with the regulations

As can be expected when new rules are implemented, there are a number of challenges that firms are encountering when looking to keep up with the EU ESG regulations. These include finding the significant resources needed to compile and report the relevant information and metrics to monitor sustainability and control measures both at firm level and at product level, as well as the difficulties related to product classification.

For example, with fund flows from ESG-conscious investors at stake, there may be internal pressure to classify a product as Article 8 (funds that promote an environmental or social characteristic), or Article 9 (funds that target bespoke sustainable investments), when in fact it should be labelled as Article 6 (funds that do not integrate any kind of sustainability into the investment process). This creates a compliance risk for the business.

On the other hand, other asset managers fear being accused of mis-selling or greenwashing and are cautiously categorising products that could be classified as Article 8 or 9 as Article 6 instead.

This is not helped by a certain lack of clarity about the terms utilised within the SFDR. For example, the definition of an Article 8 product is: “A fund which promotes, among other characteristics, environmental or social characteristics, or a combination of those characteristics, provided that the companies in which the investments are made follow good governance practices.” However, the definition of “good governance practices” is unspecific and open to interpretation, making it difficult to accurately designate a product with complete confidence.

Planning your next steps

With a swiftly changing regulatory environment, seeking professional guidance on remaining compliant is essential. To facilitate this process, Euronext has published its ESG Reporting Guide (Target 1.5°C) for listed companies to help ensure better communication between issuers and investors on all matters related to sustainability.


Not only are organisations facing a number of new or updated pieces of legislation, but they also have to decipher what are often unclear or ambiguous definitions in order to make decisions that they hope will maintain their compliance. While this is a significant time in terms of the EU tackling the issues of climate change through sustainable finance, it is also a challenging period for issuers.

As a company, Euronext is committed to creating environmentally-friendly services and products to help partners and clients contribute to reducing the increase in the planet’s temperature. This forms a key element of Euronext’s “Fit for 1.5°” initiative.  Products include Euronext ESG Bonds, Euronext ESG Funds and Euronext ESG Derivatives.

Euronext’s ESG Advisory service helps you build your sustainability story and improve the market perception of your ESG activities. If you are an issuer or planning an IPO and need help creating or optimising your ESG strategy, you can connect with the ESG Advisory team here.

References and Further Reading

Note that EU regulations are continuously being updated; please be sure to check the latest information.

Did you know?

Under the SFDR, funds are classified into three categories:

  • Article 6 – funds that do not integrate sustainability
  • Article 8 – funds that promote environmental or social characteristics (known as ‘light green’ funds)
  • Article 9 – funds that target bespoke sustainable investments (known as ‘dark green’ funds)

[1] The timelines for the CSRD are indicative and subject to change.

News category