EC has welcomed the publication, by the Technical Expert Group on Sustainable Finance, of a report on the classification of green economic activities—or taxonomy—and a usability guide for the Green Bond Standard in EU. The report on taxonomy contains recommendations on the design of the "green list" in EU, including guidance on how companies and financial institutions can use it. The usability guide on the EU Green Bond Standard aims to support potential issuers, verifiers, and investors of EU Green Bonds and offers views on the practical application of the EU Green Bond Standard. EC will use an upcoming public consultation on sustainable finance to explore a possible initiative for an EU Green Bond Standard.
Sustainable Finance Taxonomy
The Taxonomy Regulation, agreed at the political level in December 2019, creates a legal basis for the EU Taxonomy. The Taxonomy Regulation sets out the framework and environmental objectives for the Taxonomy as well as new legal obligations for financial market participants, large companies, EU, and member states. The Taxonomy Regulation will be supplemented by delegated acts that contain detailed technical screening criteria for determining when an economic activity can be considered sustainable and, hence, can be considered Taxonomy-aligned. EC established a Technical Expert Group on Sustainable Finance, which was tasked with developing recommendations on a range of topics, including what the Taxonomy technical screening criteria should be for the objectives of climate change mitigation and adaptation. This report sets out the final recommendations of the expert group to EC.
EC will use this report as a basis to develop rules setting out the classification of green activities for climate change mitigation and climate change adaptation. EC will adopt the classifications for climate change mitigation and climate change adaptation in the form of Delegated Acts by the end of 2020, as set out in the Taxonomy Regulation. This report and its Technical Annex contain:
- Recommendations relating to the overarching design of the Taxonomy
- Guidance on how users of the Taxonomy can develop Taxonomy disclosures
- A summary of the economic activities covered by the technical screening criteria
- A full list of revised or additional technical screening criteria for economic activities that can substantially contribute to climate change mitigation or adaptation, along with methodological statements to support the recommendations (in the Technical Annex)
Usability Guide on EU Green Bond Standard.
The Technical Expert Group on Sustainable Finance has been tasked with developing recommendations for an EU Green Bond Standard, in addition to the recommendations for an EU classification system or Taxonomy on Sustainable Finance, methodologies for EU climate benchmarks and disclosures for benchmarks, guidance to improve corporate disclosure of climate-related information. The EU Green Bond Standard Usability Guide offers recommendations from the expert group, with its views on the practical application of the EU Green Bond Standard, as it was described by the expert group's EU Green Bond Standard report. This Guide aims to support potential issuers, verifiers, and investors of EU Green Bonds. It provides guidance reflecting the latest changes in the draft model of the EU Green Bond Standard. The expert group proposes that the use of EU Green Bond Standard remains voluntary. Issuers of green bonds that do not want to use the term "EU Green Bond" and prefer opting for other market practices are not obliged to follow the following four proposed components of the EU Green Bond Standard:
- The alignment of the use-of-proceeds with the EU Taxonomy
- The content of a Green Bond Framework to be produced by the issuer
- The required Allocation and Impact Reporting
- The requirements for external verification by an approved verifier
Going forward, EC will hold a public consultation on sustainable finance to explore a possible initiative for an EU Green Bond Standard. EC is planning to hold a public consultation for three months from mid-March. This will form the basis for the Renewed Sustainable Finance Strategy that will be presented in the third quarter of 2020, as announced in the European Green Deal. Part of the consultation will be dedicated to a possible legislative initiative on an EU Green Bond Standard. The draft model of the EU Green Bond Standard, developed by the expert group, will form the basis of the consultation. After evaluation of the feedback and an internal impact assessment, EC will publish its decision on whether a legislative approach will be pursued and what form the final EU Green Bond Standard should have. Green bond market participants are encouraged to participate in the consultation.
- Report on Taxonomy (PDF)
- Technical Annex (PDF)
- Usability Guide (PDF)
- Overview of Technical Expert Group
Keywords: Europe, EU, Banking, Insurance, Securities, Sustainable Finance, Green Bond Standard, Taxonomy, Disclosures, Climate Change Risk, ESG, EC
Previous ArticlePRA Updates Pre-Issuance Notification Regime for Capital Instruments
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.
The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.
The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).
The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.