The European Commission’s sustainable finance expert group has launched a consultation on the preliminary results of its work on an EU-wide system for determining whether an economic activity is environmentally sustainable.
The taxonomy, as it is dubbed, is the focus of one of the regulations the Commission has proposed to implement its sustainable finance action plan.
The technical expert group (TEG) on sustainable finance, which is helping the Commission with the taxonomy and other matters, today issued calls for feedback on two aspects of the taxonomy.
It invited feedback on the first group of economic activities it proposed be deemed as contributing substantially to climate change mitigation.
It has also invited views from future users of the taxonomy – member states and financial market participants – on its usability in practice.
In addition, technical experts have been invited to register for workshops to provide technical input on the development of criteria to assess climate change adaptation activities and “doing no harm” across all the Commission’s environmental objectives.
Announcing the call for feedback today, the Commission said the ultimate aim was “to develop a system that provides businesses and investors with clarity on which activities are considered sustainable so they take more informed decisions”.
Potential users of the taxonomy are being invited to respond to five questions, including if the proposed approach was “sufficiently clear and usable for investment purposes” and if not, what changes respondents would propose.
The TEG survey also asks financial market respondents specifically whether the proposed structure and format of the taxonomy would enable them to comply with potential future disclosure obligations.
The TEG’s consultation document stated that the taxonomy was not a mandatory list of activities in which to invest, but linked to disclosure requirements.
The Commission has proposed that financial market participants, when marketing financial products as environmentally sustainable investments, be required to report how and to what extent the taxonomy criteria have been used to determine their sustainability.
Nathan Fabian, chief responsible investment officer at the Principles for Responsible Investment and rapporteur for the TEG’s taxonomy section, said: “The taxonomy would be a major step forward for sustainable investing as it is first time that standards on climate mitigation, adaptation and other environmental objectives would be incorporated into financial disclosure obligations.
“There is a global need for clarity on what economic activities are sustainable”
Nathan Fabian, chief responsible investment officer, PRI
“There is a global need for clarity on what economic activities are sustainable. As the biggest effort globally, the EU taxonomy can influence global capital flows to sustainable assets and companies.”
PensionsEurope, Europe’s occupational pension fund association, has described the taxonomy as “a useful tool”, for example as the basis for discussions with investment managers or providing information to members and beneficiaries.
At a recent event in Brussels, an official from the Commission addressed concerns expressed by PensionsEurope that the taxonomy could lead to pressure on pension funds to invest or divest from certain sectors or companies.
The deadline for feedback is 22 February. Only feedback provided through its dedicated surveys would be taken into account, the TEG said. Interest in participating in the workshops needed to be registered by 4 January.
The surveys can be accessed here.