Portugal
Answer ... As Portugal is an EU member state, several regulatory regimes relating to ESG matters are applicable in the country, including:
- the Taxonomy Regulation;
- the Sustainable Finance Disclosure Regulation;
- the Delegated Act supplementing Article 8 of the Taxonomy Regulation; and
- the financing sector delegated acts, which set out the main regulatory regime applicable to ESG in Portugal within the financial sector.
Environment: Various domestic regulations establish important rules on environmental matters, such as:
- the Climate Framework Law;
- the Waste Management Legal Regime;
- the legal regime for waste streams;
- the Environmental Impact Assessment Legal Regime; and
- the Water Law.
The Criminal Code also sets out situations in which criminal liability may arise as a result of environmental crimes that cause damage to the environment or to nature. These provisions apply to both companies and individuals.
Social: Portuguese law includes gender quotas aimed at ensuring the balanced representation of women and men in the management and supervisory bodies of public sector companies and listed companies. In 2017, a law was enacted to combat racial discrimination; and in 2019, legislation was adopted establishing a quota system for the employment of persons with disabilities, to promote their employment by private sector employers and public sector bodies. The Labour Code and complementary legislation set out the principal rules on workers’ rights and health and safety matters.
Governance: The Commercial Code is the most important law in this regard. Listed companies also adhere to the Corporate Governance Code issued by the Portuguese Institute of Corporate Governance. Although not mandatory, compliance with this code (and other international codes) is assessed through the annual reporting obligations on corporate governance.
A recent decree-law also established:
- the National Anti-Corruption Mechanism (MENAC), an independent administrative entity with legal personality under public law and authority powers; and
- the General Scheme for the Prevention of Corruption.
MENAC’s mission is:
- to promote transparency and integrity in public action; and
- to ensure the effectiveness of policies to prevent corruption and related offences.
Portugal
Answer ... In Portugal, and as mentioned in question 1.1, the ESG framework is mainly based on hard law – namely, EU law. As regards corporate matters, soft law also plays a relevant role.
Global soft law instruments such as the United Nations Guiding Principles on Business and Human Rights and the Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises play a key role as non-binding instruments for companies that wish to stay ahead of the game, especially when it comes to environmental and social due diligence mechanisms.
Portugal
Answer ... Environment: The Ministry of Environment and Climate Change plays an important role in the regulation of environmental matters. Several public entities are also responsible for enforcing the environmental legal framework, such as:
- the General Inspection of Agriculture, Sea, Environment and Spatial Planning, which carries out inspections of all activities and all public and private entities with environmental relevance, imposing measures to prevent or eliminate situations that present a severe risk to human health and the safety of persons, goods and the environment;
- the Portuguese Environment Agency, whose mission is to propose, develop and monitor the integrated and participated management of environmental and sustainable development policies; and
- the Institute for Nature Conservation and Forests, whose mission is to propose, develop and ensure the execution of nature conservation and forest policies, taking into account the conservation, sustainable use, recovery, use and recognition of natural assets.
Social: The Ministry of Labour, Solidarity and Social Security plays an important role, in cooperation with the General Inspectorate of Agriculture, Sea, Environment and Spatial Planning.
Governance: The main regulators with respect to governance matters are:
- the Ministry of Economy and Digital Transition;
- the Bank of Portugal;
- the Securities Market Commission; and
- the Insurance and Pension Funds Authority.
As the competent financial supervisory authorities, the Bank of Portugal, the Securities Market Commission and the Insurance and Pension Funds Authority also enforce the ESG framework in the financial sector.
Portugal
Answer ... Due to the novelty of the ESG paradigm and doubts in the local market regarding the application of an incomplete framework, the approach of local regulators to ESG is essentially pedagogical and aims to create awareness of the new obligations relating to ESG.
Likewise, whenever a new financial product is created, the supervisory authorities undertake a preliminary assessment of its compatibility with the claims made by issuers under the ESG framework to prevent greenwashing.
Both the Bank of Portugal and the Securities Market Commission have published public statements and brief guidelines on this matter addressed to local entities.
However, given that relevant laws are due to enter into force in the coming months, we anticipate that the enforcement of ESG matters may begin to tighten over the course of the year.
Portugal
Answer ... GRACE – Empresas Responsáveis is a membership-based non-governmental organisation dedicated to sharing and leveraging sustainability-related best practices in the private sector. ESG topics feature prominently in GRACE’s pipeline and sector-driven clusters have been established to gather together different companies. Although it was not established for the express purpose of complementing ESG frameworks, it has nonetheless contributed to their development in Portugal.
BCSD Portugal has also played a relevant role in this regard by promoting discussion, raising awareness and promoting best practices.