EU Reaches Political Agreement on Sustainable Investment Taxonomy
EU ambassadors endorsed a political agreement reached between Finland's presidency of the Council and the European Parliament on EU-wide classification system, or taxonomy, which will provide businesses and investors with a common language to identify what economic activities can be considered environmentally sustainable. At present, there is no common classification system at EU or global levels to define an environmentally sustainable economic activity. The proposed regulation is meant to reduce fragmentation resulting from market-based initiatives and national practices as well as reduce the practice of marketing financial products as green or sustainable, when they do not meet basic environmental standards.
The future framework on sustainability will be based on six EU environmental objectives. These are climate change mitigation,climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems. 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 an application by the end of 2022. The taxonomy will be instrumental for EU to become climate-neutral by 2050 and achieve the Paris agreement's 2030 targets.
To qualify as environmentally sustainable, economic activities will have to fulfill the following requirements:
- Contribute substantively to at least one of the six environmental objectives
- Not significantly harm any of the environmental objectives
- Be carried out in compliance with minimum social safeguards
- Comply with specific technical screening criteria
The taxonomy will include two sub-categories of "enabling" and "transitional" activities. There will be an obligation to disclose, for each financial product, the proportion invested in the enabling and transitional activities. On this basis, EC will be tasked to establish the actual classification by defining technical screening criteria, in the form of delegated acts, for each relevant environmental objective and sector, respectively. EC will be assisted by a technical expert group, the "platform on sustainable finance," which will be mandated to provide advice for developing and revising the technical screening criteria as well as reviewing their usability. In addition, EC will be advised by an expert group consisting of experts from member states on the appropriateness of the technical screening criteria and the approach EC to be taken regarding these criteria. The new rules will be formally adopted by the Council and the Parliament following legal and linguistic revision of the text, pursuant to the "early second reading agreement" procedure.
Related Links
Keywords: Europe, EU, Banking, Insurance, Securities, Sustainable Finance, Taxonomy, ESG, Climate Change Risk, European Parliament, European Council
Previous Article
EIOPA Report Outlines Key Financial Stability Risks for InsurersRelated Articles
EBA Publishes Final Regulatory Standards on STS Securitizations
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
ECB Further Reviews Costs and Benefits Associated with IReF
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
IOSCO Welcomes Work on Sustainability-Related Corporate Reporting
The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)
EBA Publishes Funding Plans Report, Receives EMAS Certification
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
BoE Allows One-Day Delay in Statistical Data Submissions by Banks
The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.
ACPR Amends Reporting Module Timelines Under EBA Framework 3.2
The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.
ECB Paper Discusses Disclosure of Climate Risks by Credit Agencies
The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)
APRA to Modernize Prudential Architecture, Reduces Liquidity Facility
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.
