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(BRUSSELS) – The European Commission put forward a number of measures Tuesday to strengthen the EU’s sustainable finance framework and its move away from carbon-emitting energy sources.
The move is to support the EU’s transition to a climate-neutral and sustainable economy by 2050 and acknowledges the challenges companies and investors have faced when it comes to complying with new disclosure and reporting requirements. The EU sustainable finance framework would continue to support companies and the financial sector, and encourage the private funding of transition projects and technologies.
The package adds additional activities to the EU Taxonomy and proposes new rules for Environmental, Social and Governance (ESG) rating providers, which will increase transparency on the market for sustainable investments. The EU executive says the package aims to ensure that the sustainable finance framework works for companies that want to invest in their transition to sustainability, and also to make the sustainable finance framework easier to use.
Regarding the EU Taxonomy Delegated Acts, the Commission has approved in principle a new set of EU Taxonomy criteria for economic activities making a substantial contribution to one or more of the non-climate environmental objectives, namely: sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, protection and restoration of biodiversity and ecosystems.
Targeted amendments to the EU Taxonomy Climate Delegated Act expand on economic activities contributing to climate change mitigation and adaptation not included so far in particular in the manufacturing and transport sectors. The Commission has also adopted amendments to the EU Taxonomy Disclosures Delegated Act, to clarify the disclosure obligations for the additional activities.
The Commission is also proposing a Regulation to improve the reliability and transparency of ESG (Environmental, Social and Governance) ratings activities. New organisational principles and clear rules on the prevention of conflicts of interest will increase the integrity of the operations of ESG rating providers. The rules will enable investors to make better informed decisions regarding sustainable investments, says the EU executive, and will require that ESG rating providers offering services to investors and companies in the EU be authorised and supervised by the European Securities and Markets Authority (ESMA).
Finally, the Commission presented an overview of the recent measures and tools put forward to address key implementation issues and questions raised by stakeholders. This shows that companies across all key economic sectors are using the EU Taxonomy more and more as part of their transition efforts. The Commission has developed a series of targeted measures and initiatives to enhance the usability of the rules and support stakeholders in their implementation. The Commission is also publishing the EU Taxonomy User Guide, a guidance document on the Taxonomy for non-experts.
The EU legal framework can be used effectively to facilitate transition finance, says the Commission. The recommendations on transition finance aim to provide guidance as well as practical examples for companies and the financial sector. These aim to show how companies can use the various tools of the EU sustainable finance framework on a voluntary basis to channel the investments into the transition and manage their risks stemming from climate change and environmental degradation. The objective is to facilitate transition finance, not only for companies that have strong sustainability records already, but also for those that are at different starting points, with credible plans or targets to improve their sustainability performance.
