ISDA published its response to the EC consultation on the draft technical screening criteria for climate change mitigation and adaptation under the proposed delegated act for the EU Taxonomy. In its response, ISDA recommends, among others, alignment between the technical screening criteria and the relevant provisions in the existing EU legislation, establishment of a comprehensive framework for activities contributing to climate change mitigation, a phase-in approach to activities, respecting the technological neutrality of the screening criteria, and incorporation of a grandfathering clause for certain data. The ISDA response endorses the general remarks of the European Federation of Energy Traders. EC is expected to adopt the final delegated act for EU Taxonomy in early 2021.
ISDA welcomes the opportunity to respond to EC consultation on technical screening criteria for climate change mitigation and adaptation. The following are the key highlights of the main recommendations of ISDA in response to the EC consultation:
- Ensuring alignment between the technical screening criteria laid out in the delegated act and the relevant provisions in the existing EU legislation. ISDA supports the alignment between a number of technical screening criteria laid out in the draft delegated acts and the relevant provisions in the existing EU acquis. ISDA urges EC to ensure that such alignment constitutes a common principle underpinning the Taxonomy Regulation (Article 19(1)(d)).
- Setting comprehensive framework for activities contributing to climate change mitigation. ISDA welcomes the EC commitment to ensuring that technical screening criteria consider whether the given economic activity makes a substantial contribution to climate change mitigation in accordance with the Taxonomy Regulation 2020/852. The delegated act should create a proportionate framework for both transitional and enabling activities, based on their respective contributions to climate change mitigation.
- Phase-in approach. For activities upgrading or altering existing assets or processes, the adaptation solutions identified need to be implemented within five years from the start of the activity. A similar phase-in approach should apply for the existing activities when the delegated act comes into application as well as for new activities established after the delegated act comes into application. The length of the phase-in should be proportionate to the type of activity.
- Respecting technological neutrality of screening criteria in line with Article 19(1)(a) of Taxonomy Regulation. The said article stipulates that the screening criteria must “identify the most relevant potential contributions to the given environmental objective while respecting the principle of technological neutrality, considering both the short and the long-term impact of the given economic activity.”
- Data grandfathering clause. A grandfathering clause should apply when data based on the time before the delegated act enter into force is compiled or transferred into the period for which taxonomy rules apply.
- Others. A “where feasible” or “where applicable” principle in application of the criteria is vital to implementing the criteria in practical terms and would benefit from further guidance (with industry input). Furthermore, to avoid any doubt, it should be clearly stated that third-country activities count if an Environmental Impact Assessment has been completed in accordance with equivalent national provisions or international standards.”
Keywords: International, Europe, EU, Banking, Insurance, Securities, Climate Change Risk, ESG, Technical Screening Criteria, Sustainable Finance, Taxonomy Regulation, Responses to Consultation, EC, ISDA
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
Previous ArticleBOT Enhances Support Measures for Debtors Amid Pandemic
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.
The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.
The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.
The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),
The Swiss National Bank (SNB) published Version 1.2 of the reporting forms (NSFR_G and NSFR_P) on the net stable funding ratio (NSFR) of banks, along with the associated documentation.
The Farm Credit Administration published, in the Federal Register, the final rule on implementation of the Current Expected Credit Losses (CECL) methodology for allowances