European Council adopted, at first reading, a regulation setting out an EU-wide taxonomy or classification system for environmentally sustainable activities. This regulation will be key to enabling the EU to become climate neutral by 2050 and to achieve the 2030 targets of the Paris agreement. These targets include a 40% cut in greenhouse gas emissions, for which EC estimates that EU has to fill an investment gap of about EUR 180 billion per year. The expectation is to establish the EU taxonomy for climate change mitigation and adaptation by the end of 2020.
The taxonomy is intended to provide businesses and investors with a common language to identify the economic activities that are considered environmentally sustainable. The future framework will be based on six EU 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
- Protection and restoration of biodiversity and ecosystems
As per the adopted regulation, the taxonomy for climate change mitigation and climate change adaptation should be established by the end of 2020 to ensure its full application by end of 2021. For the four other objectives, the taxonomy should be established by the end of 2021 for application by the end of 2022. The text of the regulation was adopted by written procedure, which means that the European Council has adopted its position at first reading. The regulation now needs to be adopted by the European Parliament at a second reading before it can be published in the Official Journal of the European Union and can enter into force. This regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. Upon finalization, this regulation will help establish a framework to facilitate sustainable investment and will amend the EU Regulation 2019/2088.
Keywords: Europe, EU, Banking, Insurance, Securities, Climate Change Risk, Taxonomy, ESG, Regulation 2018/2088, Disclosures, Sustainable Finance, European Council
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.
FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.
RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.
The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.
HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.
ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).