The European Commission presented a series of implementing rules in late April 2021, based on the sustainable finance taxonomy of the European Union (EU), published in June 2020, which details the technical criteria that companies must meet to earn a green investment label in Europe. The aim is to help improve the flow of money towards sustainable activities in the EU by redirecting investments towards more sustainable technologies and companies. These measures are expected to help make Europe climate neutral by 2050.
The EU taxonomy is a robust, science-based transparency tool for companies and investors. It creates a common language that investors can use when investing in economic projects and activities that have a substantial positive impact on the climate and the environment. It covers 13 sectors, including renewable energy, transport, forestry, manufacturing, buildings, insurance and even the arts, which together account for almost 80% of the EU’s greenhouse gas emissions. Moreover, it describes what economic activities are in line with the Paris Agreement and its objective of limiting global warming.
The package presented in April 2021 consists of:
• The EU Delegated Act on Climate Taxonomy with the objective of supporting sustainable investment by making it clearer which economic activities contribute the most to achieving the EU’s environmental objectives.
• A proposal for a Corporate Sustainability Reporting Directive (CSRD) with the aim of improving the flow of information on sustainability in the business world.
• Six amending delegated acts that modify fiduciary obligations, investment advice and insurance; will guarantee that financial companies include sustainability in their procedures and their investment advice to clients.
The EU has taken important steps in recent years to build a sustainable financial system that contributes to the transition to a climate neutral Europe. The EU Taxonomy Regulation, Sustainable Finance Disclosure Regulation and Reference Regulation form the basis of the EU’s work to increase transparency and provide tools for investors to identify sustainable investment opportunities.
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