To bring clarity to the discussions regarding the next steps in the taxonomy implementation, we sat down with Aila Aho, Executive Adviser at Nordea and Rapporteur for the Green Bond Standard in the European Commission’s Technical Expert Group (TEG) on Sustainable Finance.
“The key parts of the taxonomy legislation were agreed upon in December, and the European Commission will announce the criteria for climate change adaptation and mitigating by the end of this year“, she explains.
The taxonomy now enters the implementation phase for all corporates subject to the Non-Financial Reporting Directive. They will be required to disclose the proportion of turnover and/or CAPEX aligned with the taxonomy. This is new. The obligation for providers of financial products (e.g. funds) to use the taxonomy as a benchmark remains and will accelerate financial market participants’ learning of the taxonomy.
“Already by mid-March, the TEG will publish their updated report on the taxonomy and a related user guidance to facilitate the implementation by market participants. The Green Bond Standard Group will also publish guidance for the EU Green Bond Standard, which refers to the taxonomy to define what is green use of proceeds”, Aho adds.
Not only does the taxonomy regulation feature exclusion of solid fossil fuels (i.e. coal), the definition of social safeguards has been expanded. To ready an organisation for this change, Aho mentions that “issuers may already consider how to describe their commitments and process to live up to the enlarged minimum safeguards included in the new legislation.”
Meanwhile, a multitude of viewpoints are evident among investors. Some, primarily the smaller asset managers cautious about the sustainability mega trend but not able and/or willing to commit the means to hire sustainability experts to develop a house view, welcome the taxonomy as a useful tool. Others are less positive and argue that the taxonomy is not sufficient.
Implementation plan for the EU taxonomy:
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