The European Commission has proposed new measures for the EU’s sustainable finance framework (13 June). The proposed legislative package would add activities to the EU Taxonomy and new rules for Environmental, Social and Governance (ESG) rating providers, aiming to increase transparency on the market for sustainable investments.
“The EU has achieved a great deal to promote sustainable finance over the years. Today we are going even further in completing the regulatory landscape to help generate much-needed investments for sustainable growth. It is essential that the rules and instruments in place are coherent, user-friendly and work effectively on the ground. At the same time, we want to ensure that all companies can get finance to invest in their transition to sustainability. This is also important to increase the long-term competitiveness of Europe’s companies and economy and to fight climate change,” said Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People.
A new set of EU Taxonomy criteria for economic activities would include: sustainable use and protection of water and marine resources; transition to a circular economy; pollution prevention and control; and protection and restoration of biodiversity and ecosystems.
To complement this, the Commission has adopted targeted amendments to the EU Taxonomy Climate Delegated Act, which would expand on economic activities contributing to climate change mitigation and adaptation not currently included, for example, in the manufacturing and transport sectors. The inclusion of more economic activities covering all six environmental objectives, and consequently more economic sectors and companies, would increase the usability and the potential of the EU Taxonomy in scaling up sustainable investments in the EU, according to the Commission.
In terms of the new rules for ESG ratings, the Commission has proposed new organisational principles and clear rules on the prevention of conflicts of interest would increase the integrity of the operations of ESG rating providers. These new rules would enable investors to make “better-informed decisions” regarding sustainable investments, the Commissioned said.
The proposal would also 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 would ensure the quality and reliability of their services to protect investors and ensure market integrity, the EU’s executive body said.
The EU Taxonomy Delegated Acts are approved in principle and once all EU official languages will be made available, they will be adopted and scrutinised by the European Parliament and the Council. They are expected to apply as of January next year, the Commission said. Regarding the ESG ratings proposals, the Commission will now engage in discussions with the European Parliament and Council.