IRELAND Law and Practice Contributed by: Keith Robinson, Barry Tyrrell and Julia Mullin, Dillon Eustace LLP
The SFDR requires Irish banks to provide detailed disclosures about the sustainability characteris - tics of their products, which in turn will assist investors in making more informed choices as to their investments. Under the SFDR, Irish banks must disclose how they incorporate sustainabil - ity risks into their investment decisions. The EU Taxonomy Regulation The EU Taxonomy Regulation entered into force in June 2020 and established a classification or taxonomy system which provides businesses with a common language to identify whether or not a given economic activity should be consid - ered “environmentally sustainable”. Irish banks must align with the EU Taxonomy Regulation when determining the sustainability of loans, products or investments. The EU Taxonomy Regulation requires Irish banks to take greater accountability through reg - ularly reporting on how their lending and invest - ment activities align with sustainable objectives. Corporate Sustainability Reporting Directive The Corporate Sustainability Reporting Direc - tive (the “CSRD”) entered into force in January 2024 and replaced the Non-Financial Reporting Directive. The CSRD has enhanced the scope and detail of ESG disclosures which are required from companies, including Irish banks. The CSRD requires entities to employ a robust internal framework for sustainability reporting, capable of adapting to changing requirements and withstanding rigorous external scrutiny. The CSRD also requires Irish banks to include sustainability reporting disclosures across ESG topics within their annual management report covering both financial impacts and impacts on people and the environment. The European Union (Corporate Sustainability Reporting) Reg -
ulations 2024 which came into force in Ireland on 6 July 2024 transposed the CSRD into Irish law. ECB Climate Stress Tests Irish banks, under the supervision of the CBI will be subject to climate stress testing, as part of the broader European banking supervision framework. In light of the promotion and imple - mentation of stringent ESG standards, the ECB has incorporated climate change considerations into its supervisory practices. The stress testing evaluates both physical risks relating to climate change-related disasters, and transition risks which may arise due to a low-carbon economy. The results of the tests will be used to ensure that Irish banks are maintaining sufficient capital in order to manage any risk. Sustainability Promotion by the CBI and Green Finance Initiatives The CBI has played an increasingly active role in ensuring that ESG factors take importance in the strategies employed by Irish banks. The CBI has had to acknowledge the importance of ESG factors in more recent years and its account - ability in ensuring Irish banks are aligning with sustainability objectives. In 2021, the CBI published a “Dear CEO” let - ter which provided specific guidance to banks and financial institutions in Ireland in respect of climate-related and environmental risks. The CBI outlined its aim to focus its supervisory expecta - tions in five key areas: governance; risk manage - ment; scenario analysis; strategy and business analysis risk; and disclosures. The guidance also largely reflected the ECB’s supervisory expecta - tions and the increasing responsibilities that Irish banks now have to adhere to environmental and social standards.
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