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Sustainable Finance Measures
June 13, 2023

In a move to bolster the EU sustainable finance framework, the European Commission has unveiled a comprehensive package of measures. The proposed package aims to capitalize on the opportunities presented by the transition to a climate-neutral and sustainable economy by 2050 while addressing the challenges faced by companies and investors in complying with new disclosure and reporting requirements.

The primary objective of the package is to ensure the continued support of the EU sustainable finance framework for companies and the financial sector. Additionally, it seeks to encourage private funding for transition projects and technologies. To achieve these goals, the Commission is introducing additional activities to the EU Taxonomy and proposing new rules for Environmental, Social, and Governance (ESG) rating providers. These measures aim to enhance market transparency for sustainable investments and facilitate companies’ transition to sustainability.

The EU Taxonomy Delegated Acts constitute a pivotal aspect of the sustainable finance framework. The Commission has provisionally approved a new set of criteria, focusing on economic activities contributing significantly to non-climate environmental objectives. These encompass the sustainable use and protection of water and marine resources, the transition to a circular economy, pollution prevention and control, and the protection and restoration of biodiversity and ecosystems. Complementary amendments to the EU Taxonomy Climate Delegated Act have also been adopted, expanding the coverage of economic activities related to climate change mitigation and adaptation in manufacturing and transport sectors. The broader scope of economic activities and sectors covered by the EU Taxonomy will facilitate the scaling up of sustainable investments within the EU.

Furthermore, the Commission has put forth a proposal for a regulation of ESG rating providers to address the lack of transparency in the ESG rating market. The proposed regulation aims to improve the reliability and transparency of ESG rating activities by establishing clear rules and organizational principles to prevent conflicts of interest. Additionally, the proposal mandates that ESG rating providers offering services to investors and companies within the EU must be authorized and supervised by the European Securities and Markets Authority (ESMA). This measure is intended to safeguard the quality and reliability of their services, ensuring investor protection and market integrity.

The Commission also emphasizes the importance of enhancing the usability of the sustainable finance framework. Measures have been introduced to address implementation issues and provide guidance to stakeholders. Notably, the EU Taxonomy User Guide, a guidance document designed for non-experts, has been published to facilitate companies’ and financial institutions’ understanding and utilization of the Taxonomy.

The proposed package aligns with the Commission’s commitment to the European Green Deal objectives and represents a significant step toward realizing a sustainable EU economy. The EU Taxonomy Delegated Acts are expected to be adopted and transmitted to the European Parliament and the Council after the completion of a scrutiny period. The Commission will engage in discussions with the European Parliament and Council regarding the regulation of ESG rating providers. Furthermore, the Commission is currently gathering feedback on the first set of sustainability reporting standards for companies, with the aim of finalizing and adopting the standards to advance the transition to a sustainable economy.

As the EU pushes forward with its sustainable finance agenda, these measures signal a continued commitment to driving investments toward sustainable projects and facilitating the transition to a greener and more resilient future.

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