The objective of this regulation is to provide higher standards of EU green taxonomy disclosure for firms who trade in securitised financial products (the securitised finance market is worth over £50 billion this year, thus RODs are a significant part of the sustainable finance market).
Direct sales practices are highly regulated and financial advisers need to show they adhere to all applicable standards to ensure credibility in their performance. There are currently two key standards, GAAP and IFRS. GAAP is the auditing standard set by the Financial Accounting Standards Board (FASB), solely for external reporting and disclosure. IFRS, adopted by the International Accounting Standards Board (IASB), is an internationally recognised system for remotely checked internal control and means of internally monitoring EU green taxonomy internal financial and accounting records.
The extent of the legal obligations on investment advisers will vary with which country is concerned and the role of the advisor. The United Kingdom has no particular standards pertaining to the levels of regulation, as the key issue is that levels of regulation will ensure high standards of disclosure and performance.
The learning for UK firms, as we move forward, is that standards of practice in the United States do not have to be similar in the EU, the main difference being that the reporting requirements in the USA are consistent with those of the UK. The EU will be able to set its own standards, but for the UK, there is an EU green taxonomy obligation in its existing Basel II framework, issuing an accurate set of financial reporting standards that, whilst aligned with US requirements, are opt Lebanese to be used as a benchmark.
Globally recognised standards and standards of practice are always contentious to say the least and a clear alternative for the UK market is to join over for a full audit to decide whether or not the market is mature and relevant to implement new standards, and have the UK experience, as a leading country in sustainable finance, backing you and your new approach. Change in the EU green taxonomy regulatory landscape will inevitably reduce the market impact of any particular regulation, simply because a market drives what it does".
The main steps in the EU market response are the five fundamental concessions that if not applied can lead to a positive result:
1. The council must impose responsibility and responsibility cannot be delegated to individuals or groups. Even if there are a couple of deficiencies, leaving EU green taxonomy to individuals creates no strong motivation for anyone to change, even if there are only superficial flaws.
2. The council must require that a review of standards be done by third parties regularly in order to ensure compliance by firms and become a valuable learning tool.
3. The council must give specialist advice and help on a continuous basis, this may not be an adoption rate but not providing guidance and thinking around the sector becomes increasingly less useful over time.
4. The council must introduce new flexibility and improve the ability for firms to set their own standards in order to mitigate the perceived barrier of accountants.
5. The council must be responsible for the voluntary disclosure of all quarterly reporting requirements and make sure that this is joined up with the firm’s EU green taxonomy auditing system to ensure high standards of performance.