By Robin Hamaker-Taylor
The European Commission is continuing to progress the implementation of their Action Plan for Financing Sustainable Growth. New reports have been published, regulations have been established, and more are on the way. Much of this recent activity has implications for financial institutions. This is the second of a two-part article series that aims to round up these developments.
This article narrows focus to newly adopted EU regulations on the Taxonomy, the European Bond Standard, the European Green Deal, and a consultation on the updated EU Sustainable Finance strategy. The first article looked at the developments relating to the EU Sustainable Finance Taxonomy and impending regulation, and is available here.
Be sure not to miss the calls and consultations linked throughout this article, several of which end in mid-July 2020.
EU Taxonomy Regulation is adopted and call for members of the Sustainable Finance Platform
On 18 June 2020, European Parliament adopted the EU Taxonomy Regulation (TR). The TR creates a legal basis for the EU Taxonomy and sets out the framework and environmental objectives for the Taxonomy. It will be supplemented by delegated acts*, due to be established in 2020-2021. These acts will contain detailed technical screening criteria for determining when an economic activity can be considered sustainable, and hence when activities can be considered Taxonomy-aligned.
To help the Commission prepare the technical screening criteria and develop the taxonomy further, the Commission has launched a call for applications for members of the Platform on Sustainable Finance. This platform will be an advisory body composed of experts from the private and public sector, according to a Commission press release. Platform members will also advise the Commission on the further development of the EU Taxonomy to cover other sustainability objectives and provide advice on sustainable finance more broadly.
The deadline for applications is 16 July 2020. For more information on the Platform on Sustainable Finance and how to apply, please visit: Register of Commission expert groups – Calls for applications.
*Delegated acts are legally binding acts that enable the Commission to supplement or amend non‑essential parts of EU legislative acts, for example, in order to define detailed measures. Read more about the proposed timeline for EU Taxonomy delegated acts and what they mean for climate risk disclosures in part one of this two-part series.
European Bond Standard
The European Commission is exploring the possibility of a legislative initiative for an EU Green Bond Standard in the context of the public consultation on the renewed sustainable finance strategy. That consultation is running from 6 April to 15 July 2020. A targeted consultation on the establishment of an EU Green Bond Standard, that builds and consults on the work of the TEG, and is running for an extended period of 16 weeks between 12 June and 2 October 2020.
Based on the outcome of these two consultations, as well as ongoing bilateral stakeholder dialogues, the Commission will take a decision in Q4 2020 on how to take the Green Bond Standard. Read more about the EU Green Bond Standard here.
European Green Deal and sustainable finance
The European Green Deal is the EU’s roadmap for making the EU’s economy sustainable and make the EU climate neutral by 2050. It includes actions to boost the efficient use of resources by moving to a clean, circular economy and restore biodiversity and cut pollution, according to the European Commission’s dedicated Green Deal website.
The Green Deal outlines investments needed and financing tools available, and explains how to ensure a just and inclusive transition. Climate Action is one of nine policy areas of the Green Deal. Under the Climate Action umbrella, the Commission is proposing to establish the first European Climate Law which makes it a legal requirement for the EU to become climate-neutral by 2050. On the adaptation and resilience side, the Commission will adopt a new, more ambitious EU strategy on adaptation to climate change in early 2021, according to the Commission. The aim will be to strengthen efforts on climate-proofing, resilience building, prevention and preparedness, ensuring that businesses, cities and citizens are able to integrate climate change into their risk management practices. A public consultation will inform the design of the new adaptation strategy.
The EU recognises that Climate Action will require alignment of many key areas, including sustainable finance. While the EU will fund climate action itself, it expects that its efforts in establishing the Taxonomy Regulation and implementing the will also boost private sector investment in green and sustainable projects. So while the Green Deal may seem like a parallel initiative, it is very much intended to align with the EU’s current efforts to make finance and the wider economy sustainable.
Consultation on the renewed sustainable finance strategy
The European Commission is currently consulting on an update to the 2018 sustainable finance strategy. Building on the 2018 Action Plan on financing sustainable growth, the renewed sustainable finance strategy will provide a roadmap with new actions to increase private investment in sustainable projects and activities to support the different actions set out in the European Green Deal and to manage and integrate climate and environmental risks into our financial system. The initiative will also provide additional enabling frameworks for the European Green Deal Investment Plan. The public consultation is open until 15 July 2020.