The European Commission has introduced new measures to strengthen the European Union’s sustainable finance framework. These measures are designed to support companies and investors in the transition to a climate-neutral and sustainable economy while ensuring compliance with disclosure and reporting requirements.
By expanding the EU Taxonomy and proposing regulations for environmental, social, and governance (ESG) ratings providers, the package aims to enhance transparency in the market for sustainable investments. This approach aligns with the objectives of the European Green Deal and facilitates private funding for transition projects and technologies.
EU Taxonomy Delegated Acts
The EU Taxonomy directs investments towards green economic activities, and the Commission has approved a new set of criteria for economic activities that substantially contribute to environmental objectives. These objectives include the sustainable use and protection of water and marine resources, transitioning to a circular economy, pollution prevention and control, and the protection and restoration of biodiversity and ecosystems.
Amendments to the EU Taxonomy Climate Delegated Act have also been made to encompass more economic activities in climate change mitigation and adaptation, particularly in the manufacturing and transport sectors. These additions increase the usability and potential of the EU Taxonomy, stimulating sustainable investments across various economic sectors.
The Commission acknowledges the growing use of the EU Taxonomy among companies across various sectors and has taken steps to enhance its usability. Recent measures and initiatives have been implemented to address implementation issues and support stakeholders. The Commission has published a user guide for the EU Taxonomy, providing guidance on the system for non-experts. Additionally, the Commission wants to prioritize supporting companies and the financial sector in effectively implementing the EU Taxonomy and sustainable finance framework.
Transition to Sustainable Finance Framework
The package also highlights the effective utilization of the EU legal framework to facilitate transition finance. Recommendations on transition finance provide guidance and practical examples for companies and the financial sector to leverage the tools of the sustainable finance framework voluntarily. The recommendations apply not only to companies with established sustainability records but also to those at different starting points, emphasizing the importance of credible plans or targets to improve sustainability performance.
The EU Taxonomy Delegated Acts are approved in principle and will undergo evaluation by the European Parliament and the Council before their adoption and transmission. These acts are expected to be implemented in January 2024. The proposal for a regulation of ESG ratings providers will undergo discussions with the European Parliament and Council. Furthermore, the Commission has recently launched a feedback period on sustainability reporting standards for companies, which will contribute to the transition towards a sustainable EU economy.
The EU’s new package of measures aims to strengthen the sustainable finance framework by expanding the EU Taxonomy and improving transparency in ESG ratings activities.