On 6 July 2021, the European Commission adopted several measures to increase its level of ambition on sustainable finance.
1. Sustainable Finance Strategy
The "Strategy for Financing the Transition to a Sustainable Economy" includes six sets of actions that the EU Commission is planning on tackling:
a. Extend the existing sustainable finance toolbox to facilitate access to transition finance;
b. Improve the inclusiveness of small and medium-sized enterprises (SMEs) and consumers by giving them the right tools and incentives to access sustainable finance;
c. Enhance the resilience of the economic and financial system to sustainability risks;
d. Increase the contribution of the financial sector to sustainability;
e. Ensure the integrity of the EU financial system and monitor its orderly transition to sustainability;
f. Develop international sustainable finance initiatives and standards, and support the EU partner countries.
Note: The Commission will report on the Strategy's implementation by the end of 2023.
2. European Green Bond Standard
- The EU Commission proposed a Regulation on a European Green Bond Standard (EUGBS).
- The EUGBS intends to be a voluntary "gold standard" for green bonds.
- Issuers of green bonds will have a robust tool to show they are funding green projects aligned with the EU Taxonomy.
- Investors buying the bonds will be able to see that their investments are more easily sustainable, thereby reducing the risk of greenwashing.
- The standard will use the detailed definitions of green economic activities in the EU Taxonomy to define what is considered a green investment.
- This standard will address concerns about greenwashing and protecting market integrity to ensure that legitimate environmental projects are financed.
3. The amendment to the EU Taxonomy
- The European Commission also adopted a Delegated Act supplementing Article 8 of the Taxonomy Regulation
- The Taxonomy Regulation requires financial and certain non-financial institutions to provide information to investors about the environmental performance of their assets and economic activities.
- The Delegated Act specifies the content, methodology and presentation of information to be disclosed by large financial and non-financial companies on the share of their business, investments or lending activities aligned with the EU Taxonomy:
a. Non-financial companies will have to disclose the share of their turnover, capital, and operational expenditure associated with environmentally sustainable economic activities and any future delegated acts on other environmental objectives
b. Financial institutions, mainly large banks, asset managers, investment firms and insurance/reinsurance companies, will have to disclose the share of environmentally sustainable economic activities in the total assets they finance or invest in.
- The Delegated Act will be transmitted for scrutiny by the European Parliament and the Council for four months, extendable once by two months. Therefore it will most likely be set into force by the end of 2021.
The clock is ticking! Start reporting on climate risk and sustainability by complying with the EU Finance Regulations. Contact our policy experts to learn more about solutions adapted to your reporting needs.