TerraLex Cross-Border Guide to Cross-Border Guide to ESG and Sustainable Finance

In Austria, there are several regulations in place with respect to the disclosure of ESG criteria. In particular, the relevant disclosure regulations are mainly contained in the substantive ESG-related EU regulations and directives applicable in Austria due to the implementation of the European ESG legislation. The following provisions can be mentioned as core provisions:

Transparency on non-financial matters

Pursuant to Section 243b and Section 267b Austrian Commercial Code (Unternehmensgesetzbuch – UGB) Austrian corporations must add a non-financial report to their annual management report, if the following three requirements are met cumulatively:

1. the company must qualify as a “large corporation” within the meaning of Section 221 paragraph 3 UGB; i.e., at least two of the following characteristics have to be met: balance sheet total of more than EUR 20 Mio; turnover of more than EUR 40 Mio within the last 12 months before balance sheet date; or annual average of more than 250 employees;
2. corporations with public interest within the meaning of Section 189a paragraph 1 UGB including insurance companies, banks, and capital market-oriented companies; and
3. corporations with more than 500 employees on an annual average.

Companies also have the option of preparing a so-called non-financial report in addition to the annual management report, which must at least comply with the requirements of Section 243b paragraphs 2 to 5.

Consolidated subsidiaries are exempt from submitting a non-financial report pursuant to Section 243b paragraph 7 UGB, if they and their subsidiaries are included in the group management report or separate consolidated non-financial report of another (also foreign) EU/EEA company that complies with the requirements for submitting a non-financial report.

According to NFRD, the Non-Financial Reporting Directive (Directive 2014/95/EU) the affected corporations have to publish information related to:

• environmental matters;
• social matters and treatment of employees;
• respect for human rights;
• anti-corruption and bribery; and
• diversity on company boards (in terms of age, gender, educational and professional background).

Alongside the NFDR in addition pursuant to Section 243b UGB environmental, social, human rights and anti-corruption impacts must be disclosed to their non-financial report. The term "non-financial reporting" means that the information must be assigned to the area of sustainability, but not that it has no financial significance. Corporations are required to disclose their "business model", their "concepts", the "due diligence processes" and the "material risks" of the company's business activities for society as a whole and the environment, including how the corporation deals with these risks, as well as the most important non-financial performance indicators relevant for the respective business activity.

The board of directors has to submit, and the supervisory board has to approve the annual management report, which usually also includes the non-financial statement. Pursuant to Section 243b paragraph 6 UGB the competence and obligation for the approval by the board of directors and the supervisory board also applies in the case if the non-financial report is not included in the annual management report. A review of the non-financial statement by an independent auditor is not required yet, but this will become necessary due to the amendment of the CSRD (Directive (EU) 2022/2464).

The non-financial report must be disclosed within nine months of the balance sheet date together with the annual financial statements, the management report and (if available) the corporate governance report by filing them with the Commercial Register Court. According to the amendments of the CSRD, the publication of the sustainability report should be published in a "uniform electronic reporting format".

A deliberately inaccurate or incomplete presentation of non-financial information may constitute a criminal offense under Section 163a paragraph 1 litera 1 of the Austrian Penal Code (Strafgesetzbuch – StGB).

Amendment of the EU Corporate Sustainability Reporting Directive (CSRD)

Although the Corporate Sustainability Reporting Directive (CSRD) required Member States to transpose the rules by 6 July 2024, Austria has not yet completed transposition. On 13 January 2025, the Ministry of Justice published the consultation draft of the Sustainability Reporting Act (NaBeG), which will serve as the national implementing legislation. Companies operating in Austria should therefore monitor the legislative process and assess the potential applicability of NaBeG to upcoming reporting periods. In parallel, the European Sustainability Reporting Standards (ESRS) continue to be refined by EFRAG; entities should keep track of ongoing technical updates and application timelines.

EU Taxonomy Regulation

The EU Taxonomy Regulation (EU) 2020/852, which is in force since 1 January 2022, provides an additional level of transparency to financial market participants by recognizing and outlining the following six specific environmental objectives:

• climate change mitigation;
• climate change adaptation;
• sustainable use and protection of water and marine resources;
• transition to a circular economy;
• pollution prevention and control; or
• protection and restoration of biodiversity and ecosystems.

It supports the EU’s goal of helping capital flow to sustainable finance and green projects providing an EU classification system for environmentally sustainable economic activities in the context of the European Green Deal. It translates the EU’s environmental objectives into a clear framework for investment purposes. The EU Taxonomy Regulation creates a common, standardized language, criteria, and due diligence (quality assurance) process related to identifying economic activities that align to recognized environmental objectives. These classifications are to be used by corporations that are subject to the above-mentioned reporting obligations. If an economic activity meets the requirements of the EU Taxonomy Regulation, it can be certified in the non-financial report as environmentally sustainable within the meaning of the taxonomy.

An economic activity must fulfill the following requirements, to be certified taxonomy oriented:

1. The economic activity makes a substantial contribution to at least one of the above mentioned environmental objective;
2. The economic activity does not significantly harm any other of the above-mentioned environmental objectives;
3. The economic activity is complying with minimum social safeguards; and
4. The economic activity is complying with the technical screening criteria.

Non-financial companies must present in their management report and financial companies are required to disclose additional information (e.g., strategies for dealing with sustainability risks).

Sustainability-related disclosures Regulation

The Sustainability-related disclosures Regulation (EU) 2019/2088 represents the third pillar for promoting sustainability. The amendments are primarily aimed at broadening the scope of non-financial reporting and making external verification of its content mandatory, as well as developing the company's own European standards for sustainability reporting.

Corporate Sustainability Due Diligence Directive (CSDDD)

The European Supply Chain Directive proposal 2021/0104/COD has meanwhile evolved into the Corporate Sustainability Due Diligence Directive (EU) 2024/1760 (CSDDD), which was formally adopted in 2024. The directive aims to foster sustainable responsible corporate behavior in companies’ operations and across their global value chains and consists of corporate governance obligations. The core elements of this duty are identifying and addressing potential and actual adverse human rights and environmental impacts in the company’s own operations, their subsidiaries and, where related to their value chain(s), those of their business partners. In addition, the Directive sets out an obligation for large companies to adopt and put into effect, through best efforts, a transition plan for climate change mitigation aligned with the 2050 climate neutrality objective of the Paris Agreement as well as intermediate targets under the European Climate Law. In February 2025, the Commission adopted an Omnibus package to simplify due diligence requirements to better support responsible business practices. Companies with limited liability, more than 1,000 employees and a turnover of over EUR 450 million are under the scope of the directive.

The final CSDDD applies to:

• Large EU limited liability companies & partnerships with more than 1,000 employees and net worldwide turnover above EUR 450 million;
• Non-EU companies generating net turnover above EUR 450 million within the EU, even if they do not have a subsidiary in the Union.

The new rules will be enforced through

• administrative supervision with member states designating an authority to supervise and enforce the rules and at European level a European Network of Supervisory Authorities will be set up; and
• civil liability ensuring damage compensation for victims resulting from an intentional or negligent failure to carry out due diligence.

The precise content of a future “Austrian Supply Chain Act,” which subsequently still has to be transposed into national law will place greater responsibility on companies in the fight against the climate change, for environmental protection and for human rights and penalize violations of these values along the value chain, remains to be seen. Although the German Supply Chain Act (Gesetz über die unternehmerischen Sorgfaltspflichten in Lieferketten) already offers a good basis how this could look like, wherein German companies must take specific corporate due diligence measures within their entire supply chains in order to prevent human rights and major environmental violations.

In addition to mandatory sustainability reporting requirements under the EU Corporate Sustainability Reporting Directive (CSRD), Austrian companies often publish additional voluntary ESG disclosures. These companies use different frameworks to show their commitment and long-term view according to ESG and to demonstrate their company-strategy with respect to sustainability risks consistent to international standards. They disclose ESG-relevant information on their website or through other marketing tools. A large majority of Austrian prime market companies publish sustainability reports.

Companies often use ESG-ratings, to “certify” their sustainability report. These ESG ratings are provided by a wide range of external agencies. More than a half of the top domestic companies in Austria have voluntarily used an external audit. In addition to ensuring legal compliance, the expert knowledge brought in and the associated view from the outside, an external audit offers the opportunity to gain new insights and to address current sustainability issues, opportunities, and risks in a timely manner, thus improving the quality of reporting.

Companies often add non-mandatory information to their legally required sustainability disclosures (prepared under ESRS). Under the CSRD, the sustainability statement is subject to mandatory external assurance, whereas other parts of the management report may not be fully audited. Another incentive for companies to publish a sustainability report is the ASRA (Austrian Sustainability Reporting Award) sustainability prize, which is awarded annually to Austrian com- panies who publish outstanding sustainability reports.

Pursuant to Section 243b paragraph 5 UGB the non-financial report may rely on national, EU-based, or international frameworks for preparing the non-financial report and it must be disclosed which framework has been applied. In any case, it must be ensured that the applied framework covers the requirements of Section 243b UGB.

European sustainability reporting standards (ESRS)

The ESRS are the mandatory EU sustainability reporting standards introduced under the CSRD. They require companies to report on environmental, social, and governance matters based on the principle of double materiality. The standards include cross-cutting and topic-specific disclosures and integrate elements from frameworks such as GRI and TCFD. For companies within the CSRD scope, ESRS are the primary binding reporting framework, and the resulting sustainability statements are subject to external assurance.

Global Reporting Initiative (GRI)

The Global Reporting Initiative (GRI) is worldwide and also in Austria the most frequently used framework for ESG disclosures. According to an analysis of 2022 nearly 75% of the Austrian sustainability reports are based on GRI. The guidelines of the GRI should define standardized principles and content to increase both reporting quality and comparability through a harmonization process. Examples of topics to be reported are

• the quantified results of the CO2 emissions;
• working and payment conditions; and
• financial transparency.

Further used frameworks for ESG disclosures

A local Sustainability Codex comparable with the German Sustainability Codex does not exist in Austria. Austrian business council for sustainable development (respACT) is an organization established to support Austrian companies within the preparation of their sustainability reports, comparable with the German Council for Sustainable Development.

The European Eco-Management and Audit Scheme (EMAS) is an environmental management system developed by the European Commission for companies and organizations to evaluate, improve and inform about their environmental performance. It has numerous overlaps with ISO 14001:2015.

Nearly 50% of the companies in Austria, which have to publish a non-financial report also mentioned the UN Sustainable Development Goals (SDGs). GRI and UN Compact are currently working on a platform (Business Reporting on SDGs) to amend the reporting of GRI-Standards and to enable structured measurement and reporting on the SDGs.

Provided for multinational companies, UN Global Compact, and ISO 26000 offer frameworks for ESG disclosures. ISO 26000 is an international CSR standard on the social responsibility of organizations and provides a guide for organizations, companies, and public institutions worldwide on how to integrate social responsibility into their actions. ISO 26000 is a voluntary standard to which organizations can be certified. ISO announced that a new standard will be published defining uniform principles which stipulate the social and ecological responsibility of executives. Furthermore, the OECD and the International Labor Organization established further framework standards concerning ESG matters.

The International Integrated Reporting Council (IIRC) established the first official framework for integrated reporting. The primary purpose of a sustainability report prepared in accordance with this framework is to explain to investors those factors that have a significant impact on a company’s ability to create value over time.

The recommendations of the Task Force on Climate related Financial Disclosures (TCFD) are not frequently used in Austria. The TCFD is an internationally recognized framework that more and more investors are using to better assess ESG risks. They consider all aspects of integrating climate protection into the business model and corporate strategy. This starts with carbon accounting and ends with a monetary assessment of climate risks and opportunities based on scenario analyses.

The SASB Standards provide industry-specific sustainability disclosure metrics focused on financial materiality. They are widely used by companies with international or U.S.-based investors to meet capital market expectations. While voluntary in Austria, SASB metrics are often used alongside ESRS or GRI to provide comparable, sector-specific performance data.

The Vienna Stock Exchange has developed ESG guidelines to assist listed companies in voluntarily disclosing ESG information. These guidelines are aligned with international standards and best practices, encouraging companies to provide transparent and comparable ESG data.

The principal source of substantive ESG obligations are found in various federal and state laws. For example, Environmental Impact Assessment Act, Emission Certificate- Act 2011, Emissions Protection Act for Boiler Plants and Clean Air Act for Combustion Plants, Waste Management Act, Water Rights Act, Animal Welfare Act, Labor Protection Act, Stock Corporation Act, Stock Exchange Act, Austrian Commercial Code, Federal Law on the occupation of children and adolescents, Austrian Equal Treatment Act, Act on the Employment of disabled Employees, Sustainability and Diversity Improvement Act, General Data Protection Regulation, Data Protection Act, Whistleblower Protection Act and Consumer Protection Act. As already mentioned in the answer to question 1 EU regulations and directives have become the main source of ESG-related regulations and must be considered accordingly.

Environmentally friendly behavior is being supported by the government. For example, through statutory regulations such as limits on CO2 emissions or CO2 tax. Austria’s CO₂ pricing mechanism increases annually under the eco-social tax reform, providing a financial incentive for emissions reduction. Several national funding programs are intended to support this behavior.

Meeting the wide range of data protection and digital responsibility is a social and governance obligation, whereby these provisions are also issued by the European legislation. This includes for example the Digital Services Act by creating comprehensive new obligations for online platforms to reduce harms and counter risks online, introduces strong protections for users’ rights online, and places digital platforms under a unique new transparency and accountability framework, or the Digital Market Act as well as the AI Act.

Austrian ESG rules basically only apply within in Austrian, but certain Austria ESG rules can have extraterritorial effects. Companies that are subject to reporting obligations on non-financial information (as stated in question 1) and which are operating internationally but having the main operations still in Austria, must comply with the Austrian reporting requirements. Even if this company is not based in Austria, they have to disclose the required information regarding the operations in Austria.

There are no specific regulations on ESG advertising in Austria yet. Currently the Law Against Unfair Competition (Bundesgesetz gegen den unlauteren Wettbewerb – UWG) is applied in relation to advertising with ESG claims. Section 2 UWG prohibits misleading business practices. This concerns conduct that fulfills a per se prohibition of lit 1 to lit 23 of the Annex to the UWG or is otherwise misleading. Business practices are misleading if they contain incorrect information, withhold material information in the case of an invitation to purchase, or may mislead a market participant by other action or omission, so that the market participant is induced to make a business decision that he or she would not otherwise have made.

There are several specific case laws of Austrian Courts that deals with ESG claims and green advertising more broadly. However, with regard to the misleading nature of environmental advertising, this must be subjected to strict standards, similar to health advertising, according to established case law. In short, the Austrian Courts underline the fact that the consumer is particularly attentive towards ESG claims and any “green” advertising.

Environmental claims may only be used in advertising if they are clearly substantiated and misleading consumers are excluded and if the reference to the environmental friendliness of a product can be misunderstood, the advertiser is obligated to provide more detailed information. This was based on the high emotional impact of advertising and the complexity of environmental issues. Statements about the environmental compatibility of a product are highly suitable for influencing the purchase decision. This principle is limited by the fact that there should be no obligation to disclose all conceivable effects on the environment, because otherwise advertising in this regard would be impossible.

The strict standard applied by the Austrian case law for environmental advertising already offers noteworthy leeway to successfully prevent greenwashing The Empowering Consumers for the Green Transition Directive 2024/825/EU (ECGTD) has already entered into force and must be transposed by Member States by 2026. This regulation framework will set full power in September 2026 and amends the Unfair Commercial Practice Directive 2005/29/ES (UCPD) and the Consumer Rights Directive 2011/83/EU. Once transposed into national law the ECGTD will prohibit a range of “greenwashing” practices by:

• introducing new practices deemed automatically unfair, specifically concerning the dissemination of misleading environmental information;
• broadening the definition of “main characteristic” of a product to encompass specified environmental and social attributes;
• incorporating additional prohibited misleading actions related to environmental claims and the advertising of irrelevant benefits; and
• expending the scope of material information to include comparative environmental, social, or circularity credentials. Failure to provide such information to consumers may constitute a misleading omission.

Furthermore, the European Commission published their proposal for a “Green Claims Directive” which provides a Europe-wide uniform standard on the content and substantiation of environmental-related advertising claims, also called “Green Claims" (see in addition question 11).

Austria does not currently have a specific national ESG general legal framework or specific obligations that need to be imposed on suppliers. However, different ESG obligations have been included in national law. For example, environmental law, labor law or unfair competition law. Additionally, the aforementioned CSDDD must be incorporated into national legislation.

In Austria, there are no liability provisions for companies or their corporate bodies which are specifically related to ESG efforts. Under Austrian company law the managing board - (Vorstand) in stock corporations and the managing directors (Geschäftsführer) in limited liability companies - are responsible for running the operations of the company. While certain measures, including setting the strategy of the company, require the approval of the supervisory board (in stock corporations) or the shareholders (in limited liability companies) the right of initiative also belongs to them.

Austrian corporate law stipulates liability of corporate bodies for general breaches of their duties. The management must always align its actions with the interests of the company. In Austria, it is now widely recognized that the interests of the company do not coincide solely with the profit interests of the shareholders. Rather, there is a pluralistic understanding of the interests of the company. The management board is therefore responsible for identifying company issues where ESG standards are either required under applicable regulations or appropriate under best practice considerations as part of the general obligation to ensure compliance of the company with laws to thereby pursue the companies’ interests. These appropriate and elaborate measures must be presented to the supervisory board or/and the shareholders’ meeting. Such management decisions no longer have to be exclusively profit-oriented. But also, ESG-oriented business decisions must remain with the diligence of a prudent business manager, i.e., the expenditure is unreasonable. This is also based on the fact that in respect to stock corporations under Austrian law pursuant to Section 70 Paragraph 1 Stock Corporation Act (Aktiengesetz - AktG) the management of a stock corporation shall manage the corporation not only in a manner which is in the best interest of the company, the shareholders and the employees but also in the best interest of the public. Considering sustainability and ESG-factors is thereby considered in the “public interest” which in turn can be considered as a justification for the management for measures which are cost intensive (and therefore lowering the earnings of a company) but which are sustainable and/or benefit ESG-factors.

If implemented ESG measures subsequently leads to a loss to the company, the company is able to assert claims for damages against the company’s management. The burden of assertion and proof lies with the company, which has to demonstrate and prove if the company has suffered damage due to misconduct by the management in relation to the management responsibility. If the claim is upheld, the liable managing board member or managing director has to pay the damage to the company. Shareholders or investors generally do not have a direct claim against the management, liability claims are asserted by the company itself. However, there is no special liability for losses due to positive ESG efforts, but it is possible to include appropriate ESG-liability provisions in the articles of association.

In line with the answer to question 8, in Austria there are currently no specific ESG liability regimes for a company/entity or its corporate bodies or representatives. Corporate bodies or representatives must act in accordance with the applicable law due to the duty of legality (Legalitätspflicht). Members of the management board may be liable for decisions taken within their powers if they culpably breach their duties. Corporate bodies are liable towards the company if they violate their duties for example if they do not comply with sustainability reporting obligations arising from the law, the articles of association or a resolution of the shareholders. The liability is structured as in the answer to question 8.

In line with the answer to question 8 and 9, in Austria there are currently no specific ESG liability regimes in Austria for a company/entity or its corporate bodies or representatives. However, if ESG rules were not complied with by a company and damage or lpss has occurered to a customer, creditor or other effected partie this may potentially give rise to tort claims pursuant to Section 1295 of the Austrian Civil Code (Allgemeines Bürgerliches Gesetzbuch – ABGB). This claim will be successful only if the protection purpose of the concerned ESG rule also aimed the individual protection of the injured party. For this purpose, the protective purpose of the affected ESG rule must be determined individually. If certain ESG related rules and obligations have been included directly within the agreement with the injured party, also claims pursuant to the individual contract can be asserted against the company, if it can be considered as a culpable breach of duty by the company. However, it remains to be seen to what extent such ESG rules and obligations will be included directly in contracts.

As mentioned in the answer to question 6, Austria will need to amend its national legislation to transpose the Empowering Consumers for the Green Transition Directive ECGTD, which has already entered into force at EU level. Furthermore, the aforementioned proposal for a directive on green advertising (Proposal for a Directive on substantiation and communication of explicit environmental claims (Green Claims Directive), COM/2023/166 final) has been submitted by the European Commission. The Green Claims Directive provides a Europe-wide, uniform standard on the content and substantiation of environmental-related advertising claims (“Green Claims”). In addition, companies would be required to obtain prior confirmation of the admissibility of their advertising with environmental claims from independent verifiers, designated by the member states.

The proposal provides an adequate and effective sanction mechanism in case of so-called “Greenwashing” and contains precise specifications as to how environmentally related claims (for example green, climate neutral, for sustainability etc.) may be advertised. Most important are the minimum criteria for evidence of environmental claim. This means that only claims that have a demonstrably positive impact on the environment should be used. But first the implementation of the Green Claims Directive into Austrian law is still necessary in order to be able to estimate the effects.

In order to align financial flows in a climate-friendly way, a Green Finance focus group with key players from the Austrian financial sector was launched at the beginning of 2019 to address the question of what contribution the Austrian financial market can make to achieving climate and energy targets and how an Austrian Green Finance Agenda can be developed.

In 2018 the European Commission published the “Action Plan: Financing Sustainable Growth” launching a comprehensive EU strategy for sustainable finance. In May 2018, the European Commission presented a Green Finance legislative package, the core elements of which have since been adopted and implemented as binding EU law. This consisted, on the one hand of the EU Taxonomy Regulation, Sustainability-related Disclosures Regulation (SFDR) and the Corporate Sustainability Reporting Directive (CSDR) and on the other hand two delegated legal acts on insurance intermediaries and investment firms to ensure better customer advice on sustainability aspects.

The obligation to publish sustainability reports under the CSDR and the due diligence requirements for large companies (details in the answer to question 1) also apply to the financial market, which is not exempt from all these obligations. For the financial market in particular the Sustainable Finance Disclosure Regulation (SFDR) is a relevant legal source. The European Sustainable Finance Plan is built on several pillars, including the EU Taxonomy Regulation (details in the answer to question 1).

In Austria, the competent authority for the enforcement of disclosure obligations in accordance with the SFDR (Regulation (EU) 2019/2088) is the Financial Market Authority (FMA).

Sustainable Finance Disclosure Regulation (SFDR)

The SFDR sets out harmonized rules for financial market participants and financial advisers on transparency in relation to disclosure about the integration of sustainability risks and consideration of adverse sustainability impacts in their processes and in providing information about the sustainability of financial products. It has applied since 10.03.2021 and was amended in January 2024. The SFDR provides comprehensive disclosure requirements on sustainability risks for financial providers and financial advisors. This is intended to provide transparency and ensure that both private and institutional investors include ESG factors in their investment decisions. In this context, the EU framework also includes climate related benchmark regimes, such as the EU Climate Transition and Paris aligned benchmark. The following disclosure obligations arise from the SFDR:

Website disclosure:

• transparency of sustainability risk policies pursuant to Article 3 SFDR;
• transparency of adverse sustainability impacts at entity level pursuant to Article 4 SFDR; and
• transparency of remuneration policies in relation to the integration of sustainability risks pursuant to Article 5 SFDR.

Disclosures in pre-contractual documents:

• transparency of the integration of sustainability risks pursuant to Article 6 SFDR; and
• transparency of adverse sustainability impacts at financial product level pursuant to Article 7 SFDR.

Disclosures in periodic reports

According to the disclosures in pre-contractual documents financial products are divided into three categories, with different reporting requirements:

• financial products with environmental or social characteristics - so-called "light green products" (Article 8 SFDR);
• financial products aiming at sustainable investment - so-called "dark green products" (Article 9 SFDR); and
• other financial products for which sustainability criteria are not considered.

In 2024, the consultations on the SFDR, which were initiated by the European Commission at the end of 2023, will become more important and significant changes can be expected.

Financial Market Authority (FMA)

The FMA supervises banks, insurers, pension funds, occupational pension funds, investment firms and investment service providers, investment funds, financial conglomerates, and stock exchange companies. It also supervises that:

• legal requirements, fairness and transparency are observed in the trading of listed securities (market and stock exchange supervision);
• when securities are offered to the public, comprehensive prospectuses adequately present the opportunities and risks of the investment to the public (supervision of capital market prospectuses);
• the principles of good corporate governance and proper advice are observed (supervision of compliance and rules of conduct);
• unauthorized offering and provision of financial services is prevented and punished; and
• all financial institutions have appropriate facilities in place to prevent money laundering and terrorist financing.

In addition to a structured dialogue with all stakeholders on sustainability issues, two specific thematic aspects of the FMA priorities have been able to be highlighted: on the one hand the appropriate integration of sustainability risks into strategy, governance and risk management of supervised entities (with a focus on resilience), and on the other hand observance of the necessary disclosures regarding sustainable financial products, in order to reduce risks of greenwashing (with a focus on collection investor protection).

FMA also monitors compliance with the Securities Supervision Act (Wertpapieraufsichtsgesetz – WAG). The WAG refers to the SFDR concerning the definition of sustainability factors. According to Section 90 paragraph 1a WAG the FMA has to verify if the ESG-relevant requirements of the SFDR and the Directive on the establishment of a framework to facilitate sustainable investment EU (2020/852) are met.

The FMA has published a report reviewing the implementation of its Guide for Managing Sustainability Risks in the Austrian financial market. The European Securities and Markets Authority (ESMA) has published its Final Report on Greenwashing and follows the Progress Report on Greenwashing published in May 2023, which offered an initial analysis of the responses to the European Commission’s 2022 Request for Input on greenwashing risks and the oversight of sustainable finance policies. The Final Report recommends adopting a risk-based approach as the foundation of supervisory efforts in addressing greenwashing.

In addition to the statutory regulations, the participants of the Austrian finance sector have created various voluntary sustainable finance and investment frameworks. Individual financial institutions or groups have defined their own frameworks for sustainable management and investment which are generally accessible to everyone. One of a leading bank in Austria has defined the following objective: “The overall objective of the Group Responsible Financing Policy is to provide main principles and rules for assessing and mitigating various reputational risks in regard to financing the Energy sector, the Defense / Weapons industry and the Gaming sector.”

By publishing those frameworks on their websites, the financial institutions or groups will be guided by these frameworks, thus contributing to market practice and expectations within the Austrian financial sector. Sustainable investments will play a major role in the future and are also a topic that is also becoming increasingly important for private investors. This development also reflects the growing importance of sustainable investments for private and institutional investors, providing important incentives for banks to voluntarily incorporate ESG rules.

Legislative activity in connection with sustainability considerations and risks has increased significantly in Austria, primarily due to EU financial market legislation. In the area of financial market law, EU legislation requires financial institutions and investment advisers to take sustainability risks and preferences into account in specific circumstances. One explicit example at national level is the area of pension funds. There, the consideration of sustainability risks in connection with the investment principles and risk management of pension funds is explicitly provided in Paragraph 25 Pension Fund Act (Pensionskassengesetz - PKG).

The fact that sustainability is an increasingly important topic in the context of supervision by the FMA is also reflected in the fact that sustainability aspects have been a supervisory and audit focus of the FMA since 2021. Additionally specific requirements can also be provided from national law.

There are currently no tax incentives or direct financial benefits available.

Austria does not yet have a standalone greenwashing statute; however, regulatory authorities, in particular the Financial Market Authority (FMA), have adopted supervisory measures to address greenwashing, especially in the financial sector.

Also, the UWG has so far been characterized by “private enforcement” (i.e., the enforcement of behavioral norms under private law), it could be questioned how effective the existing system is if many market participants pursue similar interests, namely, to act as "environmentally friendly" as possible. On the other hand, the relevant associations are already very active, as shown by the example of the consumer protection in Austria (Verein für Konsumenteninformation – VKI). Furthermore, experience shows that the interests of competitors sooner or later diverge, so that no greenwashing excesses tolerated by the general competition must be expected. The VKI started in 2021 a project called “Greenwashing-Check”. The VKI checks monthly the substance behind “green promises” made by companies, labels, and products. Serious or cross-border violations of the UWG, may result in significant financial penalties imposed by competent authorities or courts, while the VKI actively peruse enforcement through legal actions.

On the basis of UWG there have been several cases of misleading advertisement of financial services and products at the Austrian courts concerning misleading advertising, which is regulated in more detail in the UWG (as explained above in the answer to question 6).

Currently there are no major standalone national ESG initiatives announced in Austria. Upcoming legislative and regulatory developments will primarily concern the transportation and the implementation of European legislation legislation in particular the Corporate Sustainability Due Diligence Directive (CSDDD), the Corporate Sustainability Reporting Directive (CSRD), and the Empowering Consumers for the Green Transition Directive (ECGTD).

As more and more attention is paid generally to ESG related topics, ESG is also becoming increasingly important according to M&A transactions. Currently, in Austrian there hardly any legal and regulatory framework in connection with M&A transactions. However, various ESG-related obligations arising from other regulatory frameworks are already indirectly applicable to M&A transactions. Mostly from the aforementioned disclosure and from different compliance duties, which has already been discussed above While no dedicated ESG–M&A framework currently exists, further developments are expected mainly through the indirect effects of EU ESG legislation on transaction structuring, due diligence, and valuation.