Spain
Answer ... There is no standalone ESG framework in Spain. This results in a fragmented and complex landscape, with the applicable provisions dispersed among different statutes.
The ESG framework in Spain, which is still under development, includes both:
- legal obligations set out in a dynamic and growing body of legislation; and
- different sets of recommendations or best practices (see question 1.2).
The Spanish ESG regulatory framework comprises:
- the EU ESG regulatory framework; and
- the domestic ESG regulatory framework.
The European Union has enacted numerous statutes in the different areas of ESG, including:
- the Non-financial Reporting Directive (2014/95/EU) (NFRD);
- the Second Shareholders’ Right Directive (2017/828) (SRD2);
- the Sustainable Finance Disclosure Regulation (2019/2088) (SFDR);
- the Taxonomy Regulation (2020/852); and
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different provisions integrating ESG criteria in:
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- the Second Markets in Financial Instruments Directive;
- the Directive on Undertakings for Collective Investment in Transferable Securities; and
- the Alternative Investment Fund Managers Directive.
Within the domestic ESG regulatory framework, specific instruments have been issued by Parliament and the central government, ranging from laws to circulars, as well as particular articles or sections included in non-ESG-specific statutes. These are complemented in some cases – particularly in the areas of environment and social – by regulations issued by some regional authorities.
The rules set out in the domestic ESG regulatory framework either address specific ESG angles or implement (or complement) the EU ESG regulatory framework (and in some cases those of international organisations). An example of the former is the creation of so-called ‘common interest and benefit companies’; while examples of the second include:
- Law 11/2018, which implemented the NFRD in Spain; and
- Law 5/2021, which implemented the SRD2 in Spain.
The domestic statutes address different issues within the wide-ranging ESG agenda –sometimes with an integrated approach (eg, Law 9/2017 on public sector contracts, which contemplates the incorporation of social and environmental criteria in public procurement); and other times with a particular focus on a specific element of ESG. As such, they can be grouped as follows:
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The statutes relating to the environment, which mainly focus on the energy transition, include:
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- Law 26/2007 on environmental responsibility;
- Law 22/2011 on waste and contaminated soil;
- Royal Decree 564/2017 on the certification of energy efficiency in buildings;
- Royal Decree 617/2017 on alternative energy vehicles;
- Royal Decree-Law 15/2018 on urgent measures for energy transition and consumer protection; and
- Law 7/2021 on climate change and the energy transition.
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The statutes relating to social, which mainly focus on equality, non-discrimination and conciliation, include:
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- Royal Decree-Law 6/2019 on urgent measures to guarantee equal treatment and opportunities between women and men in employment and occupation;
- Royal Decree-Law 28/2020 on remote work;
- Royal Decree 901/2020 on equality plans and their registration;
- Royal Decree 902/2020 on equal pay for women and men;
- Law 10/2021 on remote work;
- Law 4/2022 on protection of consumers and users regarding situations of social and economic vulnerability; and
- Organic Law 6/2022 on equal treatment and non-discrimination.
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The statutes relating to governance, which focus on governance and long-term involvement of shareholders, include:
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- Law 11/2018; and
- Royal Legislative Decree 1/2020 approving the consolidated text of the Companies Law.
Spain
Answer ... As outlined in question 1.1, the ESG framework in Spain is based on a combination of hard regulation and soft codes.
In addition to internal codes of conduct (which are addressed in question 4.1), there are numerous external codes, including codes issued by public and private bodies.
Codes issued by public bodies include:
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codes with supranational reach, such as:
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- the UN Guiding Principles on Business and Human Rights; and
- the Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises; and
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codes with a domestic scope, such as those issued by national supervisors including the Spanish Securities Exchange Commission (CNMV), which issues:
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- general codes, such as the Governance Code of Listed Companies; and
- specific codes, such as the Code of Good Practices to regulate interest rate rises on residential mortgages.
These public sector initiatives are complemented by efforts in the private sector, where different bodies have issued guidance on specific sectors or products.
The traditional approach to ESG issues in Spain is mainly a soft approach, based on the ‘comply or explain’ principle. However, there has been a shift to a mandatory approach, whose infringement may constitute not only an administrative infraction but also in some cases a criminal offence.
Finally, in addition to regulation and codes, attention must be paid to contracts, which can constitute a source of additional ESG obligations when they incorporate the application of foreign ESG regulatory regimes and/or codes. In this regard, there is an increasing tendency in the Spanish market to incorporate ethics clauses into agreements.
Spain
Answer ... There is no specific authority designated for implementing the ESG regulatory framework in Spain (either the EU regime or the domestic regime). Different authorities, within the scope of their powers, are responsible for implementation – usually within a specific area or set of regulations.
These include:
- different ministries, as follows:
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- Environment: The Ministry for Ecological Transition and Demographic Challenge;
- Social: The Ministry of Labour and Social Economy and the newly created Ministry of Equality and Ministry of Social Rights and 2030 Agenda; and
- Governance: The Ministry of Economic Affairs and Digital Transition; and
- traditional supervisory bodies, such as:
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- the CNMV;
- the Bank of Spain (BdE);
- the Insurance and Pension Funds General Directorate; and
- the National Markets and Competition Commission.
These are complemented:
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at the central level by specific bodies such as:
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- the State Council on Corporate Social Responsibility (CERSE);
- the Women’s Institute; and
- the National Centre for Environmental Health; and
- at the regional level by specific institutions in the areas of environment and social.
As regards the implementation of codes, the organisation that issues the relevant code and its members are responsible for its implementation.
Finally, in addition to the different stakeholders (see question 7.1), the ESG regulatory framework is supervised and enforced by the ministries, bodies and institutions referred to above, as there is no specific enforcement structure for ESG issues in addition to the existing structures.
Spain
Answer ... The regulators’ general approach to ESG aims to promote awareness of the ESG regulatory framework and the obligations arising therefrom. This is done through:
- the provision of information (in most cases through the issuance of guidelines or the creation of specific sections on their webpages); and
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the issuance of reports to assess the current status of the Spanish ESG landscape (which in some cases may serve as a benchmark for best practices). Examples include:
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- policy reports issued by the ministries;
- ESG-specific reports issued by the CNMV; and
- annual reports on the comparability and reliability of the information disclosed in ESG reports issued by CERSE.
This approach is complemented by the state by channelling funds (directly or indirectly) towards the purposes of ESG implementation, including through public grants.
As regards enforcement, some supervisors have published their expectations on supervision and enforcement on both a general and specific basis. Examples include:
- the reports issued by the BdE on its expectations regarding climate change; and
- the reports issued by the CNMV on corporate sustainability.
In these reports, the authorities point out that ESG disclosure – including its verification and comparability – has now become a strategic supervisory priority. Examples in this regard include the statement on the application of EU regulations (including the SFDR).
Some authorities have started to exercise their inspection powers, in some cases under the influence of the European Union. However, none of them has yet exercised its sanctioning powers (although we expect this approach to start to tighten in the future).
Spain
Answer ... Multiple private sector initiatives have been launched in Spain to complement the ESG framework, including by thinktanks, foundations, universities and particularly associations – both those with international reach (which operate at the European level) and national associations. The latter include not only existing local industry associations in the areas of credit, collective investment undertakings and private funds (which have integrated ESG within their scope), but also associations that have been specifically established for the purpose of addressing ESG at both substantive and executive levels.
The initiatives implemented by the aforementioned organisations vary from institution to institution and include:
- the establishment of specific departments focused on ESG (particularly on sustainability);
- the creation of working groups to promote discussion, raise awareness and promote best practices;
- the carrying out of specific studies or research;
- the provision of guidance to members; and
- the organisation of events.