Malta
Answer ... The ESG regulatory regime in Malta comprises a number of EU regulations, national laws and codes of practice. The array of ESG-related regulations developed by the European Union constitutes the backbone of Malta’s ESG regulatory regime, with the main substantive EU ESG regulations being:
- the Taxonomy Regulation (2020/852);
- the Low Carbon Benchmark Regulation (2019/2089);
- the Sustainable Finance Disclosure Regulation (2019/2088) (including the regulatory technical standards);
- the Non-Financial Reporting Directive (2014/95/EU), to be replaced by the Corporate Sustainability Reporting Directive (2022/2464); and
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the five European Commission delegated regulations and directives integrating sustainability risks and factors into the following EU legislative regimes:
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- the Undertakings for Collective Investment in Transferable Securities Directive (2009/65/EC);
- the Alternative Investment Fund Managers Directive (2011/61/EU);
- the Markets in Financial Instruments Directive (MiFID II) (2014/65);
- the Solvency II Directive (2009/138); and
- the Insurance Distribution Directive (2016/97).
While there is no single national law which is ESG specific, a variety of rules and regulations may be considered to align with principles enshrined in the environmental, social and governance aspects of ESG, including but not limited to:
- the Sustainable Development Act (Cap 521 of the Laws of Malta);
- the Environmental Protection Act (Cap 549 of the Laws of Malta);
- the Renewable Sources Regulation (SL 545.11);
- the Climate Action Act (Cap 543 of the Laws of Malta);
- the Equality for Men and Women Act (Cap 456 of the Laws of Malta);
- the Code of Principles of Good Corporate Governance (Appendix 5.1 to the Capital Markets Rules, issued by the Malta Financial Services Authority (MFSA));
- the Corporate Governance Code, issued by the MFSA and applicable to entities regulated by the MFSA (‘MFSA Corporate Governance Code’); and
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the Voluntary ESG Code of Good Practice for the Remote Gaming Sector in Malta (‘MGA ESG Code’), issued by the Malta Gaming Authority (MGA).
Malta
Answer ... The ESG framework in Malta is primarily based on the mandatory ESG-related laws developed by the European Union referred to in question 1.1. In support of the regulatory developments taking effect at EU level, a number of national laws have been or are expected to be amended in accordance with the EU ESG-related regulations.
Over and above hard regulation, there has recently been an attempt by local regulators to encourage the sector within their respective remit to look beyond compliance with hard law and to adopt a corporate culture that has ESG at its core. To this end, on 5 August 2022, the MFSA launched the MFSA Corporate Governance Code, which applies to all entities authorised by the MFSA (including banks, fund managers, investment firms and insurance companies), with the exception of listed companies, setting out principles on corporate social responsibility, ESG and sustainable finance. The MFSA Corporate Governance Code encourages regulated entities to integrate ESG into their business strategies on a ‘best efforts’ basis. Insofar as listed companies are concerned, the Code of Principles of Good Corporate Governance applies on a ‘comply or explain’ basis and is predominantly geared towards recommending the adoption of corporate governance standards by such entities.
More recently, on 8 November 2023, the MGA announced the launch of the MGA ESG Code. The code will:
- complement and build on existing efforts by the industry; and
- serve as a reference point for MGA-licensed entities to regularly assess, report on and improve their ESG practices.
The MFSA Corporate Governance Code and the MGA ESG Code will:
- prepare MFSA-regulated entities and MGA licensees, respectively, for the upcoming Corporate Sustainability Reporting Directive reporting requirements; and
- serve as a voluntary ESG framework for entities that fall outside the scope of the EU regulatory regime.
Malta
Answer ... The MFSA is the national competent authority in Malta designated as responsible for:
- implementing the body of EU ESG-specific legislation; and
- overseeing ESG reporting obligations by regulated entities operating within the financial services industries and markets.
The MFSA consults frequently with industry stakeholders with a view to:
- facilitating the implementation and application of legislative initiatives as they come into force; and
- contributing to the gradual transition towards an ‘ESG-first’ culture.
In addition to the MFSA’s leading role in the ESG regulatory ambit, the Malta Stock Exchange (MSE) has a role to play in:
- advocating for sustainable finance in the local capital markets; and
- developing frameworks for the admission of sustainable financial instruments on a designated segment of the MSE.
On 25 February 2021, the MSE published a set of by-laws for the establishment of the MSE Green Market. In evaluating an application for a green bond, the MSE will:
- review the green bond framework and the external reviewer’s reports to assess whether the prospective issuer has satisfied the eligibility criteria set out in the MSE bye-laws; and
- thereafter, assess whether eligibility is retained throughout the term of the green bond.
While the MSE is, thus far, the supervisory body responsible for overseeing the admission of green bonds to the Green Bonds Market Segment of the MSE, the MSE continues to explore the possibility of developing a framework for other sustainable finance instruments.
The MGA, as the regulatory body responsible for the governance and supervision of all gaming activities in and from Malta, is responsible for overseeing ESG reporting by MGA licensees in accordance with the MGA ESG Code. The MGA will:
- review the ESG reports submitted by MGA licensees; and
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reserves the right to withdraw any formal recognition granted through the MGA ESG Code Approval Seal if false or misleading information is found to have been submitted.
Malta
Answer ... The MFSA has signalled its commitment to embrace and support the regulatory initiatives surrounding ESG under the European Green Deal and Sustainable Finance Action Plan, reiterating its drive to increase awareness of sustainable finance among the entities under its supervisory purview and ensure due compliance with the ESG-related regulatory framework. To this end, in 2022, the MFSA set sustainable finance as one of its priorities going forward.
Consistent with the approach being adopted at EU level, the MFSA aims to avoid a fragmented approach across sectors:
- looking at sustainability from a cross-sectoral perspective;
- underlining the need for coherence; and
- setting the right founding elements for such a fundamental structural shift in the financial landscape.
In doing so, applying the principle of proportionality to the Maltese financial services sector is regarded as an important consideration that must be addressed locally in the context of ESG implementation.
Given that the ESG regulatory framework is still at development stage, and that –understandably – the industry is still adjusting to relatively new considerations, the MFSA is focused on communicating with and educating the industry, with a view not only to ensuring compliance with regulatory requirements being imposed, but also – more importantly – enhancing businesses’ overall commitment to ESG and sustainable finance.
Malta
Answer ... The first prominent local initiative was the establishment of the Malta Sustainability Forum (MSF), first organised in 2019 by a leading local bank, which aims to raise awareness on the topic of sustainability with the aim of empowering citizens to make conscious decisions towards a more sustainable economy. The MSF brings together prominent holders of public office, leading industry executives and activists to discuss the ways in which the 17 UN Sustainable Development Goals can be achieved in Malta through the provision of local and international perspectives.
In 2022, 13 local business organisations announced the launch of a new alliance, called the Malta ESG Alliance (MESGA) – a private sector initiative aimed at tackling the ESG challenges that the Maltese community faces. The first ESG theme prioritised by MESGA is that of decarbonisation. To this end, members have embarked on different tangible and measurable projects with a view to reducing their respective carbon footprint.