On 3 November 2021, the Central Bank of Ireland ("Central Bank") published a "Dear CEO" letter on its supervisory expectations regarding climate and other ESG issues, which was published to coincide with the 26th UN Climate Change Conference ("COP26"). The Central Bank notes that its expectations apply to all regulated financial service providers ("RFSPs") (including fund management companies) and are articulated on the basis that they can be applied by RFSPs in a proportionate manner aligned to the nature, scale and complexity of the individual firm. The expectations do not override or replace any legal, regulatory or supervisory requirements applicable to RFSPs (such as requirements under the Sustainable Finance Disclosure Regulation and the Taxonomy Regulation).
The Central Bank notes the challenges of adhering to statutory and regulatory requirements in this area and states that its approach will evolve and will be kept under review. The Central Bank will also consider the need for sector-specific guidance.
The Central Bank's expectations focus on five key areas, as set out in the table below.
The letter refers to the establishment of the Climate Risk and Sustainable Finance Forum (the "Climate Forum") which will bring together stakeholders to share knowledge and understanding of the implications of climate change for the Irish financial system.
Addressing climate change will no doubt continue to be a strategic priority for the Central Bank and, as noted in the letter, we can expect its position to evolve as further legislative and regulatory measures are published and as the market responds and adapts to these developments and to investor demand.
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