BMR: everything you need to know about the Benchmark Regulation
In the regulatory ecosystem of sustainable finance, while the European taxonomy and the Sustainable Finance Disclosure Regulation (SFDR) often take centre stage, the Benchmark Regulation (BMR) is nonetheless an important topic.
For asset managers and ESG analysts in 2026, understanding the nuances of this text has become an operational necessity. With new revisions coming into force on 1 January 2026, the benchmark landscape is changing.
Here is an analysis of the Benchmark Regulation, its developments and its impact on your investment strategies.
What is the Benchmark Regulation (BMR)?
Regulation (EU) 2016/1011, better known as the BMR, was initially designed to restore confidence in benchmarks following the LIBOR and EURIBOR scandals. Its objective: to ensure that the indices used in the European Union are robust, reliable and transparent.
However, with the EU Action Plan for Sustainable Finance, the BMR has changed. It is no longer just about mathematical governance, but a tool for climate transition. By standardising ‘ESG’ indices, Europe is combating greenwashing and offering investors comparable benchmarks.
The two climate pillars: CTB and PAB
One of the major contributions of the Benchmark Regulation to sustainable finance is the creation of two categories of climate ‘label’ indices. For asset managers, these indices serve as the basis for the creation of ‘Article 9’ funds within the meaning of the SFDR.
Climate Transition Benchmark (EU CTB)
The climate transition index is designed to support the gradual decarbonisation of portfolios. Its minimum requirements include:
- A 30% reduction in carbon intensity compared to the initial investment universe.
- An annual decarbonisation trajectory of 7%.
- Exposure to sectors with a high climate impact at least equal to that of the reference universe.
Paris-Aligned Benchmark (EU PAB)
More ambitious, the Paris Agreement-aligned index is aimed at the most committed strategies:
- An immediate 50% reduction in carbon intensity.
- The same decarbonisation trajectory of 7% per annum.
- Strict exclusions related to fossil fuels (coal, oil, gas above certain revenue thresholds).
What changed in 2026
The regulatory framework has been refined to focus on systemic issues. Here are the key points of the 2026 update:
A scope refocused on the essentials
The regulator has ‘cleaned up’ the scope of application. From now on, the strictest obligations focus on:
- Critical indices (such as EURIBOR).
- Significant indices (used for more than £50 billion in assets).
- CTB and PAB indices, regardless of their size.
- Commodity-based indices.
‘Small’ non-significant indices are removed from the heavy scope of application, reducing the administrative burden for certain niche providers while maintaining maximum vigilance over ESG labels.
The new role of ESMA
From 1 January 2026, the European Securities and Markets Authority (ESMA) will become the sole supervisor for third-country (non-EU) benchmark administrators. For managers using US or Asian indices, this ensures a uniform layer of protection and compliance within the Union.
Impact for asset managers and ESG analysts
The impact of the BMR goes beyond simple technical compliance. It directly influences portfolio construction and client communication.
Alignment with SFDR and Taxonomy
There is a symbiosis between BMR and SFDR. A fund that claims to be ‘aligned with the Paris Agreement’ must generally use a PAB index as a benchmark to justify its sustainable investment status.
- Action: Verify that the benchmark index chosen for your Article 8 or 9 funds is listed in the ESMA register under the correct label.
Transparency of ESG methodologies
BMR requires index administrators to publish detailed statements on how environmental, social and governance factors are taken into account in each index
(except for rates and foreign exchange).
- Action: For ESG analysts, these documents are a gold mine. They make it possible to verify whether the index methodology actually corresponds to your management company's voting or engagement policy.
Transition risk management
By imposing a 7% decarbonisation trajectory (the ‘7% rule’), the BMR forces managers to anticipate transition risk. If the companies in the portfolio do not reduce their emissions, they will be automatically excluded from the benchmark index, creating a tracking error for the fund.
Summary table of CTB vs PAB requirements
The Benchmark Regulation should not be seen as an additional technical constraint, but as a tool for credibility. By standardising what constitutes a ‘climate’ index, the EU is offering asset managers a shield against accusations of greenwashing.
For analysts, the key lies in carefully reading the Benchmark Statements. In 2026, data is more accessible than ever, but you still need to know how to interpret it in relation to your portfolio ambitions.
