CMS Croatia - Sustainability blog #1

Legislation

After a relatively slow August, September marked the return of fast paced developments in the European regulatory bodies regarding sustainability policies and legislation. The dust still hasn’t settled from July, when the European Parliament rejected a motion to oppose the inclusion of specific nuclear and gas energy activities, under certain conditions, in the list of environmentally sustainable economic activities under the EU Taxonomy. The backlash was pretty sizeable and a lot of negative reactions were heard from member countries, organizations and expert bodies. On 14 September, five NGOs resigned from the Platform on Sustainable Finance (PSF) – the European body responsible for deciding the technical recommendations of the Taxonomy. These five NGOs (BEUC, Birdlife, ECOS, T&E and WWF) stated that the European Commission had “interfered politically” in the group, acting against the PSF’s recommendations, despite its legal obligation to follow science-based advice.

However, despite the negative reactions, the decision by the European Parliament is final and further legislative actions will now naturally follow. Following the decision to include nuclear and gas activities in the Taxonomy, the European Commission sent a request to the European Supervisory Authorities (ESAs, comprising EBA, EIOPA, and ESMA) to propose amendments to the SFDR’s regulatory technical standards (RTS) to take account of the exposure of financial products to investments in gas and energy activities. Following that, on 30 September, ESAs proposed their final report with draft RTS regarding the disclosure of financial products’ exposure to investments in fossil gas and nuclear energy activities under the SFDR.

The European Commission also published the final version of its EU Biodiversity Strategy for 2030. The biodiversity Strategy is an ambitious long-term plan for protecting nature and reversing the degradation of ecosystems. The Strategy’s goal is to put Europe's biodiversity on a path to recovery by 2030 with benefits for people, the climate and the planet. The final version of the Strategy emphasises the need to halt the loss of biodiversity and ecosystems across EU and to restore them as much as possible.

The European Commission has also proposed a Regulation prohibiting products made with forced labour on the Union market. The proposal is expected to affect corporate approaches to due diligence and supply chain management in addition to other EU and global measures in force or expected (primarily the proposed Corporate Sustainability Due Diligence Directive). As usual the proposed Regulation will now follow the EU's ordinary legislative procedure: the European Parliament and the Council of the European Union will adopt amendments and will have to find their mutual position in a final text which will be adopted by both institutions probably in around a year or longer.

On 23 September, ESMA published final report on updated Guidelines on sustainability-related aspects of the MiFID II suitability assessment. The Guidelines provide instructions to national competent authorities and financial advisors on how client ‘sustainability preferences’ should be gathered.?

News and Reports

On 8 September, the EU Commission published the third Environmental Implementation Review (EIR), a key reporting tool that supports environmental enforcement and raises awareness about the importance of implementing environmental rules.

The EIR report for Croatia reviewed Croatia’s implementation of EU’s environmental policies in 2022. The report states that more efforts are needed to ensure that its waste is managed in compliance with EU waste legislation. There is no comprehensive circular economy strategy, although the country has included reforms relating to the circular economy in its national recovery and resilience plan (RRP), including a new legal framework and a reform of the tourism sector. As for water management, the risk of floods is rising due to climate change. The progress on air quality has been limited even though key air pollutants have decreased significantly in Croatia.

Also, the UN published a report on the Progress on the Sustainable Development Goals: The Gender Snapshot 2022 which presents the latest evidence on gender equality in the World. This report was issued by the UN Women and UN Department of Economic and Social Affairs, and it states that violence against women remains high, while global health, climate, and humanitarian crises have further increased risks of violence, especially for the most vulnerable women and girls. Also, women’s representation in positions of power and decision-making remains below parity. Data show that the world is not on track to achieve gender equality by 2030.

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Events

On 27 September, Croatian Chamber of Economy (HGK) organized the third annual conference “Podr?imo odr?ivo” (“Let’s support sustainability”) in Zagreb. The central theme of this year’s conference was the challenges of maintaining a sustainable business in times of crisis, but also the opportunities that arise from the implementation of sustainable economic policies. The conference included keynote speakers from all over the world who are leading authorities on sustainability, including Andrew Winston (author and international expert on sustainability), Darja Krivonos (executive director of the Copenhagen Institute for Futures Studies), Mark Buckley (UN advisor; Resilience Lab hub within the UN Framework Convention on Climate Change) and Sasja Beslik (international finance expert; SDG Impact Japan).

Besides that, On 28 September, Croatian Banking Association, EY and Croatian Employers’ Association organized a conference “Sustainable Finance: mutual expectations from financial and real sector”, which was followed by a round table discussion “Sustainability as a precondition for financing”. ?

October will also be very active when it comes to events on sustainability.

On 4 and 5 October, Croatian Business Council for Sustainable Development (HRPSOR) will host the 14th annual Conference on Sustainable Development. As a part of the conference, there will also be an award ceremony for the Croatian Sustainability Index award, which is awarded annually to the most sustainable businesses in Croatia.

Moreover, the American Chamber of Commerce in Croatia will hold a conference “Sustainability of business following the ESG principles”, which will be held on 19 October.