ECB published a letter in which the President Christine Lagarde answered questions, from a Member of the European Parliament, on the application of the EU taxonomy on sustainable finance. In response to the question on the use of the EU taxonomy to estimate the volume of outstanding taxonomy-aligned loans, the ECB President stated that, at present, no infrastructure for collecting and reporting this information exists. In this context, she highlighted that the overall framework of the EU taxonomy is still incomplete and, therefore, not yet ready for use by corporates and banks. The delegated acts outlining the methodologies for calculating and disclosing the alignment with the taxonomy criteria will be gradually adopted in the coming months and the framework will only enter into full force in 2023.
The second question answered by Ms. Lagarde in the letter concerns what further changes in ECB instruments, EU legislation, or national legislation would be needed to ensure usability of the taxonomy at the loan level. The ECB President highlighted that finalization of the delegated acts of EC on the taxonomy, along with the ongoing work of EBA and Platform on sustainable finance, should provide the main forum to address the most urgent challenges related to the application of the taxonomy to loans and potentially advise on possible future legislative changes. Ms. Lagarde also mentioned that she had discussed the possible use of AnaCredit to collect information on the environmental characteristics of bank loans in her letter to Ernest Urtasun, a Member of the European Parliament. However, AnaCredit constitutes only one of the tools at the disposal of ECB to collect information on the taxonomy-alignment of banks’ lending activities and—depending on the purpose of this data—might not be the most appropriate one. ECB is closely monitoring gaps in the data and possible additional data requirements, while being fully mindful of the need to ensure consistency and avoid unnecessary reporting burdens in the context of a rapidly evolving regulatory framework. While the process of mainstreaming the EU taxonomy across the financial sector is at its inception, ECB is committed to do its part in taking this process forward. As the EU taxonomy framework is implemented and the related data become available, ECB stands ready to make the relevant statistics available to the public.
Additionally, in a separate joint statement, EC and ECB highlighted that, following the conclusion of the consultation on January 12, 2021 and a period of preparatory work, ECB will consider whether to start a digital euro project toward mid-2021.
Keywords: Europe, EU, Banking, Sustainable Finance, Taxonomy, ESG, Climate Change Risk, AnaCredit, Taxonomy Regulation, Reporting, Credit Risk, EC, ECB
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.
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