Why is there a need for the Code?
The transition to a more sustainable economy with respect to ESG (environment, social, and governance) that is desired by government and society can only succeed if private investors also make their capital available for this purpose.
This requires an appropriate range of suitable financial investments. The legislator has created rules for this in recent years and, among other measures, has stipulated that investors are to be asked about their investment preferences with respect to ESG when being provided with investment advice.
Structured securities can contribute to the desired transition to a more sustainable economy. However, there are currently no specific legal requirements for the design of structured securities with sustainability characteristics. In this context, the members of the BSW have agreed on certain minimum requirements for structured securities with sustainability characteristics with this Code.
What is the scope of the Code?
According to the Code, only those products that fulfil certain sustainability criteria may be designated as structured securities with sustainability characteristics. The Code contains minimum requirements relating to the issuer, the underlying, the product category, and the designation of relevant structured securities, as well as an ESG product and transparency standard (the product policy) to be drawn up by the issuer. The Code also contains requirements on the scope of application and monitoring by the BSW Sustainable Finance Code of Conduct Advisory Board.
The requirements of the Code are based on the statutory regulations for the consideration of sustainability-related objectives and sustainability factors in investment advice (see Annex I). The Code is also based on the ESG Target Market Concept (supplementing the target market with information on sustainability-related objectives and sustainability factors – see Annex II). The ESG Target Market Concept defines common minimum standards for structured securities, investment funds, and bonds. In terms of content, the Code extends further than the standards of the ESG Target Market Concept and defines additional criteria for structured securities with sustainability characteristics.
What is the purpose of the Code?
As a market standard, this Code is intended to support issuers in issuing structured securities with sustainability characteristics and in drawing up the corresponding product policies. In addition to the mandatory legal documentation, the Code can also assist in providing orientation to investors with respect to structured securities with sustainability characteristics.