ISDA Responds to EC Consultation on Screening Criteria in EU Taxonomy
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.”
Related Links
Keywords: International, Europe, EU, Banking, Insurance, Securities, Climate Change Risk, ESG, Technical Screening Criteria, Sustainable Finance, Taxonomy Regulation, Responses to Consultation, EC, ISDA
Featured Experts

Michael Denton, PhD, PE
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 Article
BOT Enhances Support Measures for Debtors Amid PandemicRelated Articles
APRA Publishes Results of Climate Risk Self-Assessment Survey
The Australian Prudential Regulation Authority (APRA) has published the findings of its latest climate risk self-assessment survey conducted across the banking, insurance, and superannuation industries.
ACPR Publishes Updates Related to CRD IV and Covered Bonds
The French Prudential Supervisory Authority (ACPR) published a notice related to the methods for calculating and publishing prudential ratios under the Capital Requirements Directive (CRD IV) and the minimum requirement for own funds and eligible liabilities (MREL).
EIOPA Publishes Guidance on Climate Change Scenarios in ORSA
The European Insurance and Occupational Pension Authority (EIOPA) published the risk dashboard based on Solvency II data and the final version of the application guidance on climate change materiality assessments and climate change scenarios in the Own Risk and Solvency Assessment (ORSA).
EBA and ECB Respond to Proposals on Sustainability Disclosures
The European Banking Authority (EBA) and the European Central Bank (ECB) published their responses to the consultations of the International Sustainability Standards Board (ISSB) and the European Financial Reporting Advisory Group (EFRAG) on sustainability-related disclosure standards.
BIS Report Notes Existing Gaps in Climate Risk Data at Central Banks
A Consultative Group on Risk Management (CGRM) at the Bank for International Settlements (BIS) published a report that examines incorporation of climate risks into the international reserve management framework.
EBA Publishes Multiple Regulatory Updates for Regulated Entities
The European Banking Authority (EBA) published the final guidelines on liquidity requirements exemption for investment firms, updated version of its 5.2 filing rules document for supervisory reporting, and Single Rulebook Question and Answer (Q&A) updates in July 2022.
EIOPA Issues SII Taxonomy and Guide on Sustainability Preferences
The European Insurance and Occupational Pensions Authority (EIOPA) published Version 2.8.0 of the Solvency II data point model (DPM) and XBRL taxonomy.
EESC Opines on Proposals on CRR and European Single Access Point
The European Union published, in the Official Journal of the European Union, an opinion from the European Economic and Social Committee (EESC); the opinion is on the proposal for a regulation to amend the Capital Requirements Regulation (CRR).
HM Treasury Publishes Multiple Regulatory Updates in July 2022
HM Treasury published a draft statutory instrument titled “The Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2022,” along with the related explanatory memorandum and impact assessment.
APRA Consults on Prudential Standard for Operational Risk
The Australian Prudential Regulation Authority (APRA) is seeking comments, until October 21, 2022, on the introduction of CPS 230, which is the new cross-industry prudential standard on operational risk management.