EU Taxonomy traces the way towards making Europe climate neutral

Nuclear and gas activities will be part of the next set of documents, that will be presented later this year

Photo: EU Valdis Dombrovskis and Mairead McGuinness.

With the ambition to make the EU a global leader in setting standards for sustainable finance, the Commission tabled on Wednesday a comprehensive set of measures to help improve the flow of money towards activities that are meeting the EU's environmental objectives across the Union.

It gives orientation to investors who want to use their funds to make a substantial positive impact, choosing more sustainable technologies and businesses. The new package will be instrumental in making Europe climate neutral by 2050.

The EU’s growth strategy, the European Green Deal aims to improve the well-being and health of citizens and make Europe climate-neutral by 2050, protecting, conserving and enhancing the natural capital and biodiversity.

Companies also need a comprehensive sustainability framework to change their business models accordingly and to ensure the transition in finance and prevent greenwashing. The components of the proposed package will enhance the reliability and comparability of sustainability information and will put the European financial sector at the heart of a sustainable and inclusive economic recovery.

Europe was an early leader in reforming the financial system to support investments for climate change and today, we are taking a leap forward with the first-ever climate taxonomy which will help companies and investors to know whether their investments and activities are really green, Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People, said.

This will be essential if we are to mobilise private investment in sustainable activities and make Europe climate-neutral by 2050, he stated describing that they left no stone unturned “in seeking a balanced, science-based outcome”.

We are also proposing improved rules on sustainability reporting by companies and by developing European standards, we will build on and contribute to international initiatives, EVP Dombrovskis explained.

Mairead McGuinness, Commissioner responsible for financial services, financial stability and the Capital Markets Union, commented that the financial system plays a crucial role in the delivery of the EU Green Deal, and significant investments are required to green the economy.

We need all companies to play their part, both those already advanced in greening their activities and those who need to do more to achieve sustainability, she said noting that “today's new rules are a game changer in finance”.

“We are stepping up our sustainable finance ambition to help make Europe the first climate-neutral continent by 2050. Now is the time to put words into action and invest in a sustainable way,” Commissioner McGuinness added.

First in the set of documents is the EU Taxonomy Climate Delegated Act, which aim is to support sustainable investment by making it clearer which economic activities most contribute to meeting the EU’s environmental objectives. This act will be formally adopted at the end of May once translations are available in all EU languages.

The objective of the proposal for a Corporate Sustainability Reporting Directive (CSRD) is to improve the flow of sustainability information in the corporate world. It will make sustainability reporting by companies more consistent, so that financial firms, investors and the broader public can use comparable and reliable sustainability information.

Next in the set is a Commission Communication on EU Taxonomy – Corporate Sustainability Reporting, Sustainability Preferences and Fiduciary Duties, followed by six amending Delegated Acts on fiduciary duties, investment and insurance advice. They will ensure that financial firms, such as advisers, asset managers or insurers, include sustainability in their procedures and their investment advice to clients.

The taxonomy system covers 13 sectors, including renewable energy, transport, forestry, manufacturing and buildings, that together account for nearly 80% of the EU's greenhouse gas emissions.

Nuclear and gas activities are not part of the first taxonomy documents, but for them the Commission will set out the next steps later this year.

The EU executive will also consider additional legislation to recognise the role of gas in facilitating the switch from coal and oil, which would be outside of the taxonomy.



More on this subject: Climate crisis

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