[ParlTrack]

Proposal for a regulation
Title 1

Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) 2016/1011 on low carbon benchmarks and ~~positive carbon impact~~climate transition benchmarks (Text with EEA relevance)

2018/10/29
Committee: ECON

Molly SCOTT CATO

Proposal for a regulation
Recital 13

(13) It is furthermore necessary to introduce a clear distinction between low- carbon and ~~positive carbon impact benchmarks. While the underlying assets in a~~climate transition benchmarks. The category of low- carbon benchmark should be selected with the aim of reducing carbon emissions of the index portfolio when compared to the parent index, a positive carbon impact index should only comprise components whose emissions savings exceed their carbon emissionsis focused on companies or segments of a specific market that are already compliant with the goals of the Paris Climate Agreement in the sense of being on a decarbonisation pathway that would keep global warming to 1.5°C by the end of this century. This benchmark overweights the economic activities that accelerate the decarbonisation of the market in question and underweights those that must decline for it to comply with the selected decarbonisation pathway.

2018/10/29
Committee: ECON

Molly SCOTT CATO

Proposal for a regulation
Recital 14

(14) Each company whose assets are selected as underlying in a positive impact benchmark should save more carbon emissions than it produces, hence have a positive impact on the environment. The asset and portfolio managers who claim to pursue an investment strategy compatible with the Paris Climate Agreement should therefore use positive carbon impact benchmarksThe climate transition benchmark indicates that an index is on a trajectory to achieve compliance with the Paris 1.5°C warming limit. Each company whose assets are selected as underlying must have in place a plan to reduce its carbon emissions gradually in accordance with a decarbonisation pathway that is based on a climate scenario in which global warming remains limited to 1.5°C. These plans must be made public and be credible in the sense that they represent a genuine commitment to decarbonisation and in the sense of being sufficiently detailed and technically viable.

2018/10/29
Committee: ECON

Molly SCOTT CATO

Proposal for a regulation
Recital 15

(15) A variety of benchmark administrators claim that their benchmarks pursue environmental, social and governance (‘ESG’) objectives. The users of those benchmarks do however not always have the necessary information on the extent to which the methodology of those benchmark administrators takes into account those ESG objectives. The existing information is also often scattered and does not allow for effective comparison for investment purposes across borders. To enable market players to make well-informed choices, benchmark administrators should be required to disclose how their methodology ~~takes into account the ESG factors~~ for each benchmark or family of benchmarks t~~hat is promoted as pu~~akes ESG factorsu in~~g ESG objectives~~to consideration. That information should also be disclosed in the benchmark statement. ~~The administrators of benchmarks that do not promote or take into account the ESG objectives, should not be subject to this disclosure obligation.~~

2018/10/29
Committee: ECON

Molly SCOTT CATO

(16) For the same reasons, administrators of low-carbon and of ~~positive carbon impact~~climate transition benchmarks should equally publish their methodology used for their calculation. That information should describe how the underlying assets were selected and weighted and which assets were excluded and for what reason. The benchmark administrators should also specify how the low carbon benchmarks differ from the underlying parent index, notably in terms of the applicable weights, market capitalisation and financial performance of the underlying assets. To assess how the benchmark contributes to the environmental objectives, the benchmark administrator should disclose how the carbon footprint and carbon savings of the underlying assets were measured, their respective values, including the total carbon footprint of the benchmark, and the type and source of the data used. To enable asset managers to choose the most appropriate benchmark for their investment strategy, benchmark administrators should explain the rationale behind the parameters of their methodology and explain how the benchmark contributes to the environmental objectives, including its impact on climate-change mitigation. The published information should also include details on the frequency of reviews and the procedure followed.

2018/10/29
Committee: ECON

Molly SCOTT CATO

Proposal for a regulation
Recital 17

(17) In addition, administrator of positive carbon impact benchmarks should disclose the positive carbon impact of each underlying asset included in those benchmarks, specifying the method used to determine whether the emission savings exceed the investment asset's carbon footprint.deleted

2018/10/29
Committee: ECON

Molly SCOTT CATO

Proposal for a regulation
Recital 17 a (new)

(17a) It is important that the key elements of the methods used to compile low carbon and climate transition benchmarks have a solid foundation in climate science. This will routinely be achieved by adhering to the Paris Climate Agreement, for example, by using a climate scenario and corresponding decarbonisation path that is aligned with the goals of the Paris Agreement.

2018/10/29
Committee: ECON

Molly SCOTT CATO

Proposal for a regulation
Recital 18

(18) To ensure continued adherence to the selected climate-change mitigation objective, administrators of low-carbon and ~~positive carbon impact~~climate transition benchmarks should regularly review their methodologies and inform users of the applicable procedures for any material change. When introducing a material change, benchmark administrators should disclose the reasons for that change and explain how the change is consistent with the benchmarks’ initial objectives.

2018/10/29
Committee: ECON

Molly SCOTT CATO

Proposal for a regulation
Recital 19

(19) In order to enhance transparency and ensure an adequate level of harmonization, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission to specify further the minimum content of the ESG-related disclosure obligations that benchmark administrators ~~that take into account the ESG objectives~~ should be subject to, and to specify the minimum standards for harmonization of the methodology of low- carbon and positive carbon impact benchmarks, including the method for the calculation of carbon emissions and carbon savings associated with the underlying assets, taking into account the Product and Organisation Environmental Footprint methods as defined in points (a) and (b) of point 2 of Commission Recommendation 2013/179/EU31climate transition benchmarks. The Commission should not prescribe a specific method, but should ensure that the methods are robust and evidence based. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement on Better Law-Making of 13 April 2016. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States’ experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts. _________________ 31 Commission Recommendation 2013/179/EU of 9 April 2013 on the use of common methods to measure and communicate the life cycle environmental performance of products and organisations (OJ L 124, 4.5.2013, p. 1).

2018/10/29
Committee: ECON

Molly SCOTT CATO

Proposal for a regulation
Article 1 – paragraph 1 – point 1

Regulation (EU) 2016/1011
Article 3 – paragraph 1 – point 23 a (new)

(23a) ‘low-carbon benchmark’ means a benchmark ~~where~~in which the underlying assets~~, for the purposes of point 1(b)(ii) of this paragraph, ar~~ are selected so that their activities are consistent with a 1.5°C Paris warming target, which is constructed in accordance with the standards laid down in the sdelecgated so that the resulting benchmark portfolio has less carbon emissions when compared to the assets that comprise a standard capital- weighted benchmark and which is constructed in accordance with the standards laid down in the delegated acts referred to in Article 19a(2)acts referred to in Article19a(2), and in which the underlying asset portfolio is not exposed to companies engaged in any of the following economic activities: – the exploration, extraction, distribution and processing of fossil fuels; – the construction and maintenance of power plants that burn fossil fuels; – the construction, operation and maintenance of aviation infrastructure;

2018/10/29
Committee: ECON

Molly SCOTT CATO

Proposal for a regulation
Article 1 – paragraph 1 – point 1

Regulation (EU) 2016/1011
Article 3 – paragraph 1 – point 23 b (new)

(23b) ‘~~positive carbon impact~~climate transition benchmark’ means a benchmark ~~where the underlying assets, for the purposes of point 1(b)(ii) of this paragraph, are selected on the basis that their carbon emissions savings exceed the~~that meets all of the following requirements: (i) the underlying assets selected for the benchmark are on a trajectory to become aligned with the Paris Agreement to limit global warming to 1.5°C; (ii) the asset issuers’ emissions reduction plans must include measurable targets and time-based targets that are robust and evidence-based; (iii) the companies responsible for the underlying assets have in place emissions reduction plans that are detailed and disaggregated down to the level of individual physical asset's ~~carbon footprint and which~~to enable a judgment to be made about it; (iv) the asset issuers must report annually on the progress made towards these targets; (v) the benchmark is constructed in accordance with the standards laid down in the delegated acts referred to in Article 19a(2).”;

2018/10/29
Committee: ECON

Molly SCOTT CATO

Proposal for a regulation
Article 1 – paragraph 1 – point 2 – point a

Regulation (EU) 2016/1011
Article 13 – paragraph 1 – point d (new)

(d) an explanation of how the key elements of the methodology laid down in point (a) reflect environmental, social or governance (‘ESG’) factors for each benchmark or family of benchmarks ~~which pursue or take into account ESG objectives;~~;

2018/10/29
Committee: ECON

Molly SCOTT CATO

Proposal for a regulation
Article 1 – paragraph 1 – point 2 – point a a (new)

Regulation (EU) 2016/1011
Article 13 – paragraph 1 – point d a (new)

(aa) (da) “information concerning the degree of alignment of each benchmark or family of benchmarks with the goals of the Paris Climate Agreement;”;

2018/10/29
Committee: ECON

Molly SCOTT CATO

Proposal for a regulation
Article 1 – paragraph 1 – point 2 – point b

Regulation (EU) 2016/1011
Article 13 – Paragraph 2 a (new)

2a. The Commission shall be empowered to adopt delegated acts in accordance with Article 49 to specify further the minimum content of the explanation referred to in points (d) and (e) of paragraph 1 as well as the standard format to be used.;

2018/10/29
Committee: ECON

Molly SCOTT CATO