Sustainable finance: “Taxonomy Regulation” published in the Official Journal


Sustainable finance: “Taxonomy Regulation” published in the Official Journal

25 June 2020

Regulatory News Alert

Context and objectives

After reaching a political agreement in December 2019, the EU’s Regulation 2020/852 on the establishment of a framework to facilitate sustainable investment (“Taxonomy Regulation”) was published in the Official Journal on 22 June 2020. As part of the European Green Deal, this piece of legislation is key to the development of the EU’s sustainable finance strategy.

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The regulation aims to enable investors to re-orient investments towards more sustainable technologies and businesses and reduce “greenwashing” (e.g., financial products marketed as environmentally sustainable without sufficient factual basis for their claims).

The framework is based on six EU environmental objectives:

  1. Climate change mitigation;
  2. Climate change adaptation;
  3. Sustainable use and protection of water and marine resources;
  4. Transition to a circular economy;
  5. Pollution prevention and control; and
  6. Protection and restoration of biodiversity and ecosystems.

Essentially, the Taxonomy Regulation establishes an EU classification system to provide businesses and investors with a common language to identify to what degree economic activities can be considered environmentally sustainable. In practice, the Commission will adopt delegated acts containing specific technical screening criteria to supplement the regulation’s principles and determine which economic activities can qualify for each environmental objective.

The detailed content of the regulation can be found in our regulatory alert on the subject.

Next steps

The Taxonomy Regulation shall enter into force on 12 July.

The delegated acts with the criteria for climate change mitigation and adaptation will be adopted by the end of 2020. Regarding the criteria for the other four environmental objectives (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) the delegated acts will be adopted by the end of 2021.

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