Germany’s sustainable finance advisory committee, the body advising the government on its sustainable finance strategy, is pressing the European Union to accelerate the start of the European Single Access Point (ESAP) as an essential step to make data available for investors and companies reporting in line with the taxonomy.
Investors and companies face challenges particularly on collecting quality data on value chains, as there isn’t currently an obligation to provide essential data for taxonomy reporting, the committee said in a report examining the first results on the application of the taxonomy.
ESAP, part of the Capital Markets Union (CMU) action plan, is an access point to data, including on sustainability, social governance or the workplace diversity of businesses, publicly available and relevant for capital market players and financial services to meet climate goals by steering investments towards projects supporting the transition to a green economy.
The Economic and Monetary Affairs Committee (ECON) of the European Parliament has approved in January the legal framework for the new platform, to start negotiating with EU governments.
A further tool to provide investors and companies with necessary data to report on taxonomy-related activities are databases for Life Cycle Analysis (LCA) of products that so far are subject to a fee, and whose range, and the quality of the data, do not always meet the requirements of the taxonomy regulation, the body added in its report.
The sustainable finance committee recommended, therefore, to set up public LCA databases for each product category to facilitate the use of data for taxonomy reporting.
The committee has worked on the taxonomy paper to tackle the challenges still surrounding the implementation of the regulation, its complexity, data and partial inconsistency with other regulations, for example the Corporate Sustainability Reporting Directive and the Sustainable Finance Disclosure Regulation, as reported.
“We have essentially identified three areas that pose challenges for companies when applying the taxonomy for the first time. This has an impact on the reporting and the use of information,” the member of the committee Melanie Sack said.
The sustainable finance committee considers necessary to improve transparency especially with regard to publications relating to the taxonomy by the Eurpean Commission, giving enough time to companies to read the rules before actually implementing them.
It cites as example of short notice disclosure of relevant documents in two Draft Commission Notices on the Taxonomy Ordinance on 19 December, one on the interpretation and implementation of legal provisions of the EU Taxonomy Climate Delegated Act, and the other on the interpretation and implementation of legal provisions of the Disclosures Delegated Act under Article 8 of EU Taxonomy Regulation.
German experts are also urging the Commission to review criteria used to define the green asset ratio of banks, meaning the taxonomy-compliant share of total assets, to include for example companies not required to report on non-financial matters or to report on sustainability issues under the Corporate Sustainability Reporting Directive (CSRD).
It is also demanding to consider government bonds as an asset class in the taxonomy underlining that, for example, German insurers alone invest around €500bn in government bonds and similar assets, equivalent to approximately 30% of total investments, as of 2021.
It is also essential to expand the taxonomy to include further economic and business activities, and the social taxonomy, it added in the report.