Following the publication, on Monday 9 March, of its final recommendations on European taxonomy (see EUROPE 12442/14), members of the Technical Expert Group on Sustainable Finance further elaborated on Thursday 12 March at a conference organised by the European Commission.
While the event was intended to bring stakeholders together to gather their initial reactions to the final recommendations, participants were eventually invited to stay at home and follow the conference online due to the coronavirus pandemic.
The members of the technical group of experts reviewed the changes in their thinking since their report of June 2019 (see EUROPE 12277/20). Overall, it is the “same architecture”, assured Nathan Fabian, rapporteur of the ‘Taxonomy’ sub-group. The new report updates the selection criteria for the 70 economic activities considered to contribute to climate change mitigation, including manufacturing and forestry, he said. Criteria for the ‘Do no significant harm’ principle have also been added.
The panel took into account the comments made during the public consultation over the summer. Most of the 2,975 comments focused on climate change mitigation, said panel member Sandrine Dixson-Declève. Responses from the private sector were predominant and the majority of comments came from Belgium, but also from France and Germany.
The new report also adds new criteria for 68 activities contributing to adaptation to climate change. Adaptation has become “the second column of the taxonomy”, said Nancy Saich of the panel. “There is a need to catch up on adaptation quite quickly, because the impacts are already very significant”, she explained. The methodology hasn’t changed, she said, it’s still a matter of doing a holistic study of all risks.
The conference also aimed to help investors use the EU taxonomy “dictionary”. Once the taxonomies are ready, financial market participants will be required to disclose information on how the investments underlying their financial products support economic activities that meet the criteria of the taxonomy. The first company reports and the first information for investors using the taxonomy should be published in early 2022.
“You can start using our criteria today!” said Mr Fabian, but warned that “the final criteria may differ”. That is because it is the European Commission that will have the final word, since it is responsible for drawing up the delegated acts that will set the technical selection criteria, although the group of experts hopes that they will not be too far removed from its recommendations.
The taxonomy for climate change mitigation and the taxonomy for climate change adaptation should be established by the end of 2020, with a view to their full implementation by the end of 2021. For the other four objectives, the taxonomy should be established by the end of 2021 and applied by the end of 2022.
A call for applications to form the Sustainable Finance Platform, which will assist the Commission in this task, will be launched in May/June, said Mario Nava, Director in the European Commission’s Directorate General for Financial Stability. This platform should be operational by the end of 2020.
Reactions. While the initial reactions of stakeholders to the panel’s recommendations on Monday were rather positive, the Green Finance Observatory published a very critical report on Thursday, according to which neither the ambition nor the planned timetable for the taxonomy are aligned with the science.
In particular, it is concerned that the expert group welcomes the fact that the taxonomy provides a broader – rather than narrower – investment universe than is currently available, while the current context already leaves too much room for ‘greenwashing’. (Original version in French by Marion Fontana)