(63)  Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC (OJ L 94, 28.3.2014, p. 243). Where financial market participants consider that an economic activity which does not comply with the technical screening criteria established pursuant to this Regulation, or for which such technical screening criteria have not yet been established, should qualify as environmentally sustainable, they may inform the Platform thereof. The adaptation solutions referred to in point (a) of paragraph 1 shall be assessed and ranked in order of priority using the best available climate projections and shall, at a minimum, prevent or reduce: the location-specific and context-specific adverse impact of climate change on the economic activity; or. The Commission shall adopt the delegated act referred to in paragraph 2 by 31 December 2021, with a view to ensuring its application from 1 January 2023. The Taxonomy Regulation imposes three key obligations:on member states and at EU … Adopting a consistent framework is expected to reduce "greenwashing", where … On 18 June 2020, the European Parliament adopted the regulation on the establishment of a framework to facilitate sustainable investment [1] (the Taxonomy Regulation), a milestone in the EU’s Action Plan on Sustainable Finance (the Action Plan). However, effectively the timeframe will be substantially longer as the requirements of the Regulation will apply only after the adoption of the delegated acts establishing the technical screening criteria for each environmental objective. The Taxonomy Regulation does not invalidate existing environmental labelling schemes of individual EU Member States or prevent new ones from developing; however, such schemes will need to be consistent with the criteria in the Taxonomy Regulation as to what constitutes environmentally sustainable economic activities.5. Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof. The disclosure obligations laid down in this Regulation supplement the rules on sustainability-related disclosures laid down in Regulation (EU) 2019/2088 of the European Parliament and of the Council (6). 2. 4. Common criteria for determining whether economic activities qualify as sustainable, including their impact on the environment, could underpin future similar initiatives of the Union to mobilise investment that pursues climate-related or other environmental objectives. Restructuring, Insolvency & Special Situations, Ashurst advising Brighte on its A$100 million Series C capital raise, Ashurst advises Lendi on merger with Aussie Home Loans, Ashurst advises Pacific Aegis Capital Management on HK$300 million refinancing loan to HNA Group, https://www.icmagroup.org/assets/documents/Regulatory/Green-Bonds/EU-Taxonomy-Political-Agreement-ICMA-December-2019final-191219.pdf, https://www.ashurst.com/en/news-and-insights/legal-updates/teg-releases-final-report-on-climate-benchmarks-and-benchmarks-esg-disclosures/, https://uk.practicallaw.thomsonreuters.com/w-018-9850?originationContext=document&transitionType=DocumentItem&contextData=%28sc.Default%29&comp=pluk, https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement. In addition to the use of climate-neutral energy and more investments in already low-carbon economic activities and sectors, the transition requires substantial reductions in greenhouse gas emissions in other economic activities and sectors for which there are no technologically and economically feasible low-carbon alternatives. To give sufficient time to the relevant actors to familiarise themselves with the criteria for qualification as environmentally sustainable economic activities set out in this Regulation and to prepare for their application, the obligations set out in this Regulation should become applicable, for each environmental objective, 12 months after the relevant technical screening criteria have been established. Following publication of the Action Plan, the Commission established the Technical Expert Group on Sustainable Finance (TEG) to help carry out its goals, including the development of the EU-wide taxonomy system of environmentally sustainably activities. If you have forgotten your password, you can request a new one here. The action plan recognises that the shift of capital flows towards more sustainable activities has to be underpinned by a shared, holistic understanding of the environmental sustainability of activities and investments. The investments underlying the remaining portion of this financial product do not take into account the EU criteria for environmentally sustainable economic activities.’. The EU Taxonomy is a noteworthy milestone that sets a common language for collaboration in sustainable finance. In such cases, Member States would use their own national classification systems for the purposes of determining which investments qualify as sustainable. The Commission shall establish a Platform on Sustainable Finance (the ‘Platform’). However, on June 18, 2020, the presidents of the European Council and Parliament announced that they had signed the EU Taxonomy Regulation into law, which was published in the EU’s Official Journal just four days later, heralding a new era of financial regulation. The technical screening criteria referred to in paragraph 1 shall also include criteria for activities related to the switch to clean or climate-neutral mobility, including through modal shift, efficiency measures and alternative fuels, to the extent that those are substantially contributing to any of the environmental objectives. 3. Links/References. Regulation 2019/2088 on sustainability-related disclosures in the financial services sector (Text with EEA relevance) THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof, Having regard to the proposal from the European Commission, In its communication of 20 June 2019 on ‘Guidelines on non-financial reporting: Supplement on reporting climate-related information’, the Commission recommends that certain large companies report on certain climate-related key performance indicators (KPIs) that are based on the framework established by this Regulation. You may unsubscribe at any time. detrimental to the conservation status of habitats and species, including those of Union interest. (50)  Directive (EU) 2018/844 of the European Parliament and of the Council of 30 May 2018 amending Directive 2010/31/EU on the energy performance of buildings and Directive 2012/27/EU on energy efficiency (OJ L 156, 19.6.2018, p. 75). a unified EU classification system (or a so-called taxonomy). An economic activity that pursues the environmental objective of climate change adaptation should contribute substantially to reducing or preventing the adverse impact of the current or expected future climate, or the risks of such adverse impact, whether on that activity itself or on people, nature or assets. In its conclusions of 20 June 2017 the Council confirmed the commitment of the Union and its Member States to the implementation of the 2030 Agenda in a full, coherent, comprehensive, integrated and effective manner, in close cooperation with partners and other stakeholders. An economic activity shall qualify as contributing substantially to climate change mitigation where that activity contributes substantially to the stabilisation of greenhouse gas concentrations in the atmosphere at a level which prevents dangerous anthropogenic interference with the climate system consistent with the long-term temperature goal of the Paris Agreement through the avoidance or reduction of greenhouse gas emissions or the increase of greenhouse gas removals, including through process innovations or product innovations, by: generating, transmitting, storing, distributing or using renewable energy in line with Directive (EU) 2018/2001, including through using innovative technology with a potential for significant future savings or through necessary reinforcement or extension of the grid; improving energy efficiency, except for power generation activities as referred to in Article 19(3); increasing clean or climate-neutral mobility; switching to the use of sustainably sourced renewable materials; increasing the use of environmentally safe carbon capture and utilisation (CCU) and carbon capture and storage (CCS) technologies that deliver a net reduction in greenhouse gas emissions; strengthening land carbon sinks, including through avoiding deforestation and forest degradation, restoration of forests, sustainable management and restoration of croplands, grasslands and wetlands, afforestation, and regenerative agriculture; establishing energy infrastructure required for enabling the decarbonisation of energy systems; producing clean and efficient fuels from renewable or carbon-neutral sources; or. (38)  Directive (EU) 2016/802 of the European Parliament and of the Council of 11 May 2016 relating to a reduction in the sulphur content of certain liquid fuels (OJ L 132, 21.5.2016, p. 58). 3. An economic activity can also contribute substantially to the environmental objective of transitioning to a circular economy by reducing food waste in the production, processing, manufacturing or distribution of food. On 22 June 2020, the long-awaited Regulation (EU) 2020/852 on the establishment of a framework to facilitate sustainable investment (the “EU Taxonomy Regulation”), and amending Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (the “SFDR”) was published on the Official Journal of the European Union. Article 4 shall not apply to certificate-based tax incentive schemes that exist prior to the entry into force of this Regulation and that set out requirements for financial products that aim to finance sustainable projects. (21)  Regulation (EU) 2019/1021 of the European Parliament and of the Council of 20 June 2019 on persistent organic pollutants (OJ L 169, 25.6.2019, p. 45). This Regulation establishes the criteria for determining whether an economic activity qualifies as environmentally sustainable for the purposes of establishing the degree to which an investment is environmentally sustainable. Political agreement was reached in December 2019 on the Taxonomy Regulation following intense negotiations. The Commission shall establish the technical screening criteria referred to in paragraph 3 of this Article in one delegated act, taking into account the requirements of Article 19. Member States shall ensure that their competent authorities have all the necessary supervisory and investigatory powers for the exercise of their functions under this Regulation. It has been found that such practices discourage investors from investing in environmentally sustainable financial products. Our global industry teams work together to share knowledge and experience so that we can provide our clients with insightful, innovative commercial advice. The report is supplemented by a technical annexcontaining: 1. To avoid unnecessary inconsistencies with classifications of economic activities that already exist for other purposes, the Commission should also take into account the statistical classifications relating to the environmental goods and services sector, namely the classification of environmental protection activities (CEPA) and the classification of resource management activities (CReMA) of Regulation (EU) No 538/2014 of the European Parliament and of the Council (58). Member States and the Union shall apply the criteria set out in Article 3 to determine whether an economic activity qualifies as environmentally sustainable for the purposes of any measure setting out requirements for financial market participants or issuers in respect of financial products or corporate bonds that are made available as environmentally sustainable. For those economic activities, it is appropriate to establish technical screening criteria that require a substantial improvement in environmental performance compared with, inter alia, the industry average, but at the same time avoid environmentally harmful lock-in effects, including carbon-intensive lock-in effects, during the economic lifetime of the funded economic activity. (23)  Directive 2000/53/EC of the European Parliament and of the Council of 18 September 2000 on end-of life vehicles (OJ L 269, 21.10.2000, p. 34). The description referred to in point (b) of the first subparagraph of this Article shall specify the proportion of investments in environmentally sustainable economic activities selected for the financial product, including details on the proportions of enabling and transitional activities referred to in Article 16 and Article 10(2), respectively, as a percentage of all investments selected for the financial product. of 18 June 2020. on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 (Text with EEA relevance) THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, The Taxonomy tool requires investors, companies, and financial institutions to outline the environmental sustainability of their economic activities and defines technical screening criteria for economic activities. (35)  Directive 2004/35/EC of the European Parliament and of the Council of 21 April 2004 on environmental liability with regard to the prevention and remedying of environmental damage (OJ L 143, 30.4.2004, p. 56). (13) Regulation (EU) 2015/760 of the European Parliament and of the Council of 29 April 2015 on European long-term investment funds (OJ L 123, 19.5.2015, p.98). Prior to adopting the delegated act referred to in paragraph 2 of this Article, the Commission shall consult the Platform referred to in Article 20 regarding the technical screening criteria referred to in paragraph 2 of this Article. 4. (68)  Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19). The selection process should aim to ensure a high level of expertise, geographical and gender balance, as well as a balanced representation of relevant know-how, taking into account the specific tasks of the Platform. When establishing and updating the technical screening criteria the Commission should take into account relevant Union law, including Regulations (EC) No 1221/2009 (55) and (EC) 66/2010 (56) of the European Parliament and of the Council, as well as Commission Recommendation 2013/179/EU (57) and the communication of the Commission of 16 July 2018 on ‘Public procurement for a better environment’. In view of the scale of the challenge and the costs associated with inaction or delayed action, the financial system should be gradually adapted in order to support the sustainable functioning of the economy. Where financial market participants make available a financial product as referred to in Article 6 of Regulation (EU) 2020/852 of the European Parliament and of the Council (*1), they shall include in the information to be disclosed pursuant to Article 6(1) and (3) of this Regulation the information required under Article 6 of Regulation (EU) 2020/852. As stated in the Action Plan on Financing Sustainable Growth the transport sector represents about 30 % of the additional annual investment needed for sustainable development in the Union, for example to increase electrification or to support the transition to cleaner modes of transport by promoting modal shift and better traffic management. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in paragraph 1 of this Article in accordance with Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010.’; ‘2a. The ESAs shall, through the Joint Committee, develop draft regulatory technical standards to specify the details of the content and presentation of the information referred to in paragraph 2a of this Article. However, within each sector, those criteria should not unfairly disadvantage certain economic activities over others if the former contribute to the environmental objectives to the same extent as the latter. Member States, the European Union, and the relevant market actors will have to start complying with the Taxonomy Regulation requirements from December 2021. It is therefore appropriate to require the annual publication of such KPIs by such large companies and to further define that requirement in delegated acts, in particular with regard to large financial companies. (62)  Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC (OJ L 94, 28.3.2014, p. 65). The Platform should advise the Commission on developing further measures to improve data availability and quality, taking into account the objective of avoiding undue administrative burden, on addressing other sustainability objectives, including social objectives, and on the functioning of minimum safeguards and the possible need to supplement them. I refuse cookies. The EU Taxonomy Regulation was published on 22 June 2020 and came into force on 12 July 2020. The draft regulatory technical standards shall take into account the respective dates of application set out in points (a) and (b) of Article 27(2) of Regulation (EU) 2020/852 in respect of the environmental objectives set out in Article 9 of that Regulation. Brussels, 23.4.2020. in Article 20, paragraph 3 is replaced by the following: ‘3. 2. (46)  Regulation (EU) 2018/841 of the European Parliament and of the Council of 30 May 2018 on the inclusion of greenhouse gas emissions and removals from land use, land use change and forestry in the 2030 climate and energy framework, and amending Regulation (EU) No 525/2013 and Decision No 529/2013/EU (OJ L 156, 19.6.2018, p. 1). It has since been published in the Official Journal and entered into force on 12 July 2020. 5. When complying with those minimum safeguards, undertakings should adhere to the principle of ‘do no significant harm’ referred to in Regulation (EU) 2019/2088, and take into account the regulatory technical standards adopted pursuant to that Regulation that further specify that principle. Private sector experts should include representatives of financial and non-financial market participants and business sectors, representing relevant industries, and persons with accounting and reporting expertise. 3. The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. (70)  Regulation (EU) No 525/2013 of the European Parliament and of the Council of 21 May 2013 on a mechanism for monitoring and reporting greenhouse gas emissions and for reporting other information at national and Union level relevant to climate change and repealing Decision No 280/2004/EC (OJ L 165, 18.6.2013, p. 13). However, on June 18, 2020, the presidents of the European Council and Parliament announced that they had signed the EU Taxonomy Regulation into law, which was published in the EU’s Official Journal just four days later, heralding a new era of financial regulation. 4. This Regulation supplements the disclosure requirements laid down in Directives 2009/65/EC, 2009/138/EC, 2011/61/EU, 2014/65/EU, (EU) 2016/97, (EU) 2016/2341, and Regulations (EU) No 345/2013, (EU) No 346/2013, (EU) 2015/760 and (EU) 2019/1238 as well as in national law governing personal and individual pension products. Where the investments underlying the financial product are in economic activities that contribute to an environmental objective, the information to be disclosed should specify the environmental objective or objectives to which the investment underlying the financial product contributes, as well as how and to what extent the investments underlying the financial product fund environmentally sustainable economic activities, and should include details on the respective proportions of enabling and transitional activities. (3)  Council Decision (EU) 2016/1841 of 5 October 2016 on the conclusion, on behalf of the European Union, of the Paris Agreement adopted under the United Nations Framework Convention on Climate Change (OJ L 282, 19.10.2016, p. 1). 2. For the purposes of point (b) of Article 3, taking into account the life cycle of the products and services provided by an economic activity, including evidence from existing life-cycle assessments, that economic activity shall be considered to significantly harm: climate change mitigation, where that activity leads to significant greenhouse gas emissions; climate change adaptation, where that activity leads to an increased adverse impact of the current climate and the expected future climate, on the activity itself or on people, nature or assets; the sustainable use and protection of water and marine resources, where that activity is detrimental: to the good status or the good ecological potential of bodies of water, including surface water and groundwater; or. The delegated act on the remaining four environmental objectives should be adopted by the Commission by 31 December 2021 and will therefore apply from 31 December 2022. other sustainability objectives, such as social objectives. For the purposes of this Regulation, the following definitions apply: ‘environmentally sustainable investment’ means an investment in one or several economic activities that qualify as environmentally sustainable under this Regulation; ‘financial market participant’ means a financial market participant as defined in point (1) of Article 2 of Regulation (EU) 2019/2088 and includes a manufacturer of a pension product to which a Member State has decided to apply that Regulation in accordance with Article 16 of that Regulation; ‘financial product’ means a financial product as defined in point (12) of Article 2 of Regulation (EU) 2019/2088; ‘issuer’ means an issuer as defined in point (h) of Article 2 of Regulation (EU) 2017/1129 of the European Parliament and of the Council (69); ‘climate change mitigation’ means the process of holding the increase in the global average temperature to well below 2 °C and pursuing efforts to limit it to 1,5 °C above pre-industrial levels, as laid down in the Paris Agreement; ‘climate change adaptation’ means the process of adjustment to actual and expected climate change and its impacts; ‘greenhouse gas’ means a greenhouse gas listed in Annex I to Regulation (EU) No 525/2013 of the European Parliament and of the Council (70); ‘waste hierarchy’ means the waste hierarchy as laid down in Article 4 of Directive 2008/98/EC; ‘circular economy’ means an economic system whereby the value of products, materials and other resources in the economy is maintained for as long as possible, enhancing their efficient use in production and consumption, thereby reducing the environmental impact of their use, minimising waste and the release of hazardous substances at all stages of their life cycle, including through the application of the waste hierarchy; ‘pollutant’ means a substance, vibration, heat, noise, light or other contaminant present in air, water or land which may be harmful to human health or the environment, which may result in damage to material property, or which may impair or interfere with amenities and other legitimate uses of the environment; ‘soil’ means the top layer of the Earth’s crust situated between the bedrock and the surface, which is composed of mineral particles, organic matter, water, air and living organisms; the direct or indirect introduction of pollutants into air, water or land as a result of human activity; in the context of the marine environment, pollution as defined in point 8 of Article 3 of Directive 2008/56/EC; in the context of the water environment, pollution as defined in point 33 of Article 2 of Directive 2000/60/EC; ‘ecosystem’ means a dynamic complex of plant, animal, and micro-organism communities and their non-living environment interacting as a functional unit; ‘ecosystem services’ means the direct and indirect contributions of ecosystems to the economic, social, cultural and other benefits that people derive from those ecosystems; ‘biodiversity’ means the variability among living organisms arising from all sources including terrestrial, marine and other aquatic ecosystems and the ecological complexes of which they are part and includes diversity within species, between species and of ecosystems; ‘good condition’ means, in relation to an ecosystem, that the ecosystem is in good physical, chemical and biological condition or of a good physical, chemical and biological quality with self-reproduction or self-restoration capability, in which species composition, ecosystem structure and ecological functions are not impaired; ‘energy efficiency’ means the more efficient use of energy at all the stages of the energy chain from production to final consumption; ‘marine waters’ means marine waters as defined in point 1 of Article 3 of Directive 2008/56/EC; ‘surface water’ means surface water as defined in point 1 of Article 2 of Directive 2000/60/EC; ‘groundwater’ means groundwater as defined in point 2 of Article 2 of Directive 2000/60/EC; ‘good environmental status’ means good environmental status as defined in point 5 of Article 3 of Directive 2008/56/EC; for surface water, having both ‘good ecological status’ as defined in point 22 of Article 2 of Directive 2000/60/EC and ‘good surface water chemical status’ as defined in point 24 of Article 2 of that Directive; for groundwater, having both ‘good groundwater chemical status’ as defined in point 25 of Article 2 of Directive 2000/60/EC and ‘good quantitative status’ as defined in point 28 of Article 2 of that Directive; ‘good ecological potential’ means good ecological potential as defined in point 23 of Article 2 of Directive 2000/60/EC. 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