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New Guidelines for Companies’ Sustainable Investments

Tuesday, July 2, 2019

Under the proposed EU Taxonomy, companies and investors will be able to classify sustainable investments based on their contributions to reach six environmental goals. An analysis of the new developments in Sustainable Finance is already available online, for CSR Europe members only, in the new number of EU Issue Insight.

 

On June 18 the European Commission published the Final Report on the EU Taxonomy, a new tool that companies, and investors alike, will have to use to classify sustainable activities. When can an investment be considered sustainable?  It depends on whether or not it contributes to reaching one or more of six environmental goals without harming the others: climate change mitigation; climate change adaptation; sustainable use and protection of water; transition to a circular economy and waste prevention and recycling; pollution reduction; and biodiversity.

The EU Taxonomy is the main instrument to implement the EU’s Action Plan on Sustainable Finance. Under the proposed regulation, companies and investors will be able to engage strategically to assess the sustainability merits of potential investments, while ensuring transparency and comparability. Once the Taxonomy becomes law, institutional investors will have to explain how they used its criteria to market their products as sustainable. The ambition of the Commission is that the Taxonomy will allow to re-orient capital flows thus contributing to achieve the Action Plan’s 2030 sustainability targets for a more resilient economy. 

In order to help companies in disclosing the information required under the taxonomy, the Commission also updated the Non-Binding Guidelines on Non-financial Disclosure. The new supplement on Climate-Related Disclosures introduces a double materiality perspective. In other words, companies will not only have to report on how climate change affects their business but also how their business affects the environment. Finally, the Commission released its report on the EU Green Bond Standard and the interim report on Climate Benchmarks, laying the technical foundation to create crucial instruments for low-carbon investment strategies.

Our analysis on these important developments on sustainable finance and climate reporting is already available online, exclusively to member, in the EU Issue Insight: Sustainable Finance.  CSR Europe members can also delve deeper into the implications brought about by the Taxonomy and pose their questions to an EU Commission’s expert at the upcoming Webinar on July 4th.  Later in Autumn, members will discover the practicalities of Climate-Related Reporting at the Workshop scheduled on 7 November.

The Next Steps:

  • July-September 2019: Feedback on the technical report on Taxonomy.
  • July-December 2019: Development of Taxonomy’s Climate adaptation, mitigation and DNSH framework.
  • September 2019: Final Technical Expert Group (TEG) report on Climate Benchmarks.
  • September-December 2019: Preparation of further recommendations on Taxonomy.
  • December 2019: End of TEG mandate.
  • January 2020 (Starting from): Consultation of future delegated act and creation of kick-off of the Platform on Sustainable Finance.
  • 2021(?): Revision of the Non-Financial Reporting Directive.

 

For more information:

Ilaria La Torre