The EU’s new sustainable finance strategy

The European Commission adopted an ambitious and comprehensive package of measures to help improve the flow of money towards financing the transition to a sustainable economy.

The Strategy builds on the ambitious foundations of the Action Plan on Financing Sustainable Growth and comes at a critical point in time for the progress of sustainable finance both in the EU and globally.

The main elements of the package are:
1. The strategy for financing the transition to a sustainable economy
2. The proposal for a standard for European Green Bonds
3. The delegated act supplementing Article 8 of the Taxonomy Regulation.

The strategy for financing the transition to a sustainable economy

The Commission’s new sustainable finance strategy aims to support the financing of the transition to a sustainable economy. It proposes action in the areas of transition finance, resilience and contribution of the financial system and global ambition.

With regards to measures under the EU Taxonomy Regulation:

  • The Commission will consider proposing legislation to support the financing of certain economic activities that contribute to a reduction in GHG emissions.  
  • The Commission will consider options to extend the EU Taxonomy Regulation to recognise transitional economic activities.  
  • The Commission will adopt a further delegated act covering sustainable activities which were not included in the first EU Taxonomy Delegated Act, such as the nuclear energy activities, natural gas and related technologies as transitional activities.
  • By the end of 2021 the Commission will publish a report “on the provisions required for a Social Taxonomy”.  
  • The Commission will adopt a further delegated act to cover the remaining four environmental objectives in the first half of 2022.

With regards to the EU Sustainable Finance Disclosure Regulation (SFDR), the Commission will consider labels for ESG benchmarks and the introduction of minimum sustainable criteria for financial products that promote environmental or social characteristics.  

The proposal for a standard for European Green Bonds

Once the proposed regulation on European Green Bonds has been adopted, it will set a voluntary, “gold” standard for issuers seeking to use green bonds to raise finance on capital markets. The aim will be for issuers to have the means of demonstrating that they are financing EU-taxonomy aligned green projects and, at the same time, to reduce the risk of greenwashing by giving investors the ability to compare sustainable investments against a reliable standard.

The delegated act supplementing Article 8 of the Taxonomy Regulation

The delegated act specifies the content, methodology and presentation of information to be disclosed by financial and non-financial undertakings within the scope of the Non-Financial Reporting Directive, relating to how and to what extent their activities are associated with environmentally sustainable economic activities, as defined under the EU Taxonomy Regulation.

Further details on the new strategy can be found in this link: https://ec.europa.eu/info/publications/210706-sustainable-finance-strategy_en

For more information, please speak with Antigoni Pafiti or your usual contact at Elias Neocleous & Co LLC.

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