MFSA issues circular on Sustainable Finance Reporting by Public Interest Companies

On the 8 March 2021, the MFSA published a Circular which provides financial market participants and financial advisers with further information as to the application of sub-articles (1), (2) and (3) of Article 8 of Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 (the “Taxonomy Regulation”).


Article 8 of the Taxonomy Regulation requires those undertakings falling within the scope of Directive 2014/95/EU (i.e. the Non-Financial Reporting Directive or “NFRD”) to publish in their non-financial statement or consolidated non-financial statement information as to how and to what extent the undertakings’ activities are associated with economic activities which qualify as environmentally sustainable in accordance with the provisions of the Taxonomy Regulation. Undertakings falling within the scope of the NFRD will need to disclose:

    1. the proportion of their turnover derived from products or services associated with economic activities that qualify as environmentally sustainable under the Taxonomy Regulation; and
    2. the proportion of their respective capital and operational expenditures relating to assets or processes associated with economic activities that qualify as environmentally sustainable under the Taxonomy Regulation.

The NFRD applies to public interest entities (“PIEs”), therefore meaning that the abovementioned disclosures may be incumbent on banks, insurers and listed companies depending, however, on whether they exceed on their respective balance sheet dates the average number of five hundred (500) employees during the financial year. In so far as this quantitative threshold has been met, the PIE in question will be expected to make the relevant Article 8 disclosures:

    1. as of the 1 January 2022 in relation to the environmental objectives set out in Article 9 of the Taxonomy Regulation (i.e. climate change mitigation and adaptation); and
    2. as of the 1 January 2023 in relation to the other environmental objectives (i.e. the sustainable use and protection of water and marine resources, the transition to a circular economy, pollution prevention and control and the protection and restoration of biodiversity and ecosystems).

The Taxonomy Regulation requires the European Commission to adopt by the 1 June 2021, a delegated act specifying the content and presentation of the information to be disclosed under Article 8, including in particular the methodology to be used in making disclosures.

The way forward

The MFSA concluded its Circular by reminding operators of the European Commission’s legislative efforts in the area of sustainability thus far, and further informed the market that it is actively engaging in expert fora to ensure alignment of the Maltese landscape with the Taxonomy Regulation, the Sustainable Finance Disclosures Regulation (Regulation (EU) 2019/2088) and the Sustainable Finance Benchmarks Regulation (Regulation (EU) 2019/2089). The MFSA confirmed that it will be engaging with the industry on a frequent basis in the coming months and revealed that it is currently working on the development of a strategy for Sustainable Finance for Malta with a view to publishing a concept paper in the near future.