The Commission has today put forward a new package of measures to build on and strengthen the foundations of the EU sustainable finance framework.
The aim of today’s package therefore is to ensure that the EU sustainable finance framework continues to support companies and the financial sector, while encouraging the private funding of transition projects and technologies. Specifically, the Commission is today adding additional activities to the EU Taxonomy and proposing new rules for Environmental, Social and Governance (ESG) rating providers, which will increase transparency on the market for sustainable investments. The package aims to ensure that the sustainable finance framework works for companies that want to invest in their transition to sustainability. It aims also to make the sustainable finance framework easier to use, thereby continuing to contribute effectively to the European Green Deal objectives.
- Press release
- Frequently asked questions
- Factsheet: Sustainable finance: Investing in a sustainable future
- Watch the press conference
Sustainable finance package related documents
- Communication: A sustainable finance framework that works on the ground
- Staff working document on enhancing the usability of the EU Taxonomy and the overall EU sustainable finance
- Commission notice on the interpretation and implementation of certain legal provisions of the EU Taxonomy Regulation and links to the Sustainable Finance Disclosure Regulation
Regulation on the transparency and integrity of Environmental, Social and Governance rating activities
ESG ratings play an important role in the EU sustainable finance market as they provide information to investors and financial institutions regarding, for example, investment strategies and risk management on ESG factors.
Today, the ESG ratings market currently suffers from a lack of transparency and the Commission is proposing a Regulation to improve the reliability and transparency of ESG ratings activities. New organisational principles and clear rules on the prevention of conflicts of interest will increase the integrity of the operations of ESG rating providers.
These new rules will enable investors to make better informed decisions regarding sustainable investments. Moreover, the proposal will require that ESG rating providers offering services to investors and companies in the EU be authorised and supervised by the European Securities and Markets Authority (ESMA). This will also ensure the quality and reliability of their services to protect investors and ensure market integrity.
- Proposal for a Regulation on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities
- Impact assessment accompanying the proposal
- Summary of the impact assessment accompanying the proposal
- Timeline of the legislative proposal and stakeholder's feedback
EU Taxonomy Delegated Acts
The EU Taxonomy is a cornerstone of the EU’s sustainable finance framework and an important market transparency tool that helps direct investments to the economic activities most needed for a green transition.
The Commission has today approved in principle a new set of EU Taxonomy criteria for economic activities making a substantial contribution to one or more of the non-climate environmental objectives, namely:
- sustainable use and protection of water and marine resources,
- transition to a circular economy,
- pollution prevention and control,
- protection and restoration of biodiversity and ecosystems.
To complement this, the Commission has adopted targeted amendments to the EU Taxonomy Climate Delegated Act, which expand on economic activities contributing to climate change mitigation and adaptation not included so far – in particular in the manufacturing and transport sectors. The inclusion of more economic activities covering all six environmental objectives, and consequently more economic sectors and companies, will increase the usability and the potential of the EU Taxonomy in scaling up sustainable investments in the EU.
The criteria are informed to a very large extent by the recommendations of the Platform on Sustainable Finance, published in March and November 2022. The Commission has also adopted amendments to the EU Taxonomy Disclosures Delegated Act, to clarify the disclosure obligations for the additional activities.
- Text of the Commission Delegated Regulation (EU) 2023/2486 of 27 June 2023 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to the sustainable use and protection of water and marine resources, to the transition to a circular economy, to pollution prevention and control, or to the protection and restoration of biodiversity and ecosystems and for determining whether that economic activity causes no significant harm to any of the other environmental objectives and amending Commission Delegated Regulation (EU) 2021/2178 as regards specific public disclosures for those economic activities
- Text of the Commission Delegated Regulation (EU) 2023/2485 of 27 June 2023 amending Delegated Regulation (EU) 2021/2139 establishing additional technical screening criteria for determining the conditions under which certain economic activities qualify as contributing substantially to climate change mitigation or climate change adaptation and for determining whether those activities cause no significant harm to any of the other environmental objectivesText amending the Climate Delegated Act
- Commission Staff Working Document accompanying the Environmental and Climate Delegated Acts
- Timeline of the delegated acts and stakeholder's feedback
Recommendation on transition finance
The transition to a climate-neutral and sustainable economy by 2050 offers new opportunities for companies and citizens across the EU. Many companies and investors have already embarked on their sustainability journey, as the growing size of sustainable investment testifies. However, companies and investors are also facing challenges in this transition, especially when it comes to complying with new disclosure and reporting requirements.
Today's recommendations on transition finance aim to provide guidance as well as practical examples for companies and the financial sector. These aim to show how companies can use the various tools of the EU sustainable finance framework on a voluntary basis to channel the investments into the transition and manage their risks stemming from climate change and environmental degradation.
- Commission recommendation on facilitating finance for the transition to a sustainable economy
- More information on sustainable finance
- More information on the sustainable finance taxonomy
As an expert in sustainable finance and EU regulations, I can attest to the complexity and importance of the measures outlined in the provided article. The European Commission's initiatives aim to bolster the EU's sustainable finance framework, a critical component of the broader strategy to align financial activities with environmental, social, and governance (ESG) objectives.
Let's break down the key concepts and initiatives mentioned in the article:
EU Taxonomy: This is a classification system that determines which economic activities are environmentally sustainable. The taxonomy helps investors identify sustainable investment opportunities and directs capital flows towards activities that support the transition to a green economy. The Commission's approval of new criteria for non-climate environmental objectives, such as sustainable water use, circular economy practices, pollution prevention, biodiversity protection, and ecosystem restoration, expands the scope of the taxonomy and enhances its effectiveness in guiding sustainable investments.
ESG Rating Regulation: Environmental, social, and governance (ESG) ratings provide investors with information about the sustainability performance of companies and financial products. The proposed regulation seeks to improve the transparency and reliability of ESG ratings by establishing clear rules for rating providers, preventing conflicts of interest, and requiring authorization and supervision by the European Securities and Markets Authority (ESMA). These measures aim to enhance investor confidence in sustainable investments and ensure market integrity.
Transition Finance: Transition finance refers to financial activities that support companies in transitioning to a more sustainable business model, aligned with climate and environmental objectives. The Commission's recommendations aim to provide guidance and examples for companies and financial institutions on how to utilize the tools available within the sustainable finance framework to facilitate this transition voluntarily. This includes managing risks related to climate change and environmental degradation while leveraging sustainable finance mechanisms.
By implementing these measures, the EU seeks to strengthen its sustainable finance framework, promote transparency and integrity in sustainable investments, and facilitate the transition to a greener and more sustainable economy. The initiatives demonstrate a comprehensive approach to addressing the challenges and opportunities associated with sustainable finance, reflecting the EU's commitment to advancing environmental and social objectives through financial regulation.