How to prepare for the EU classification system to define environmentally sustainable activities?
For the first time a major regulator has designed a system which sets sustainability criteria for use in financial products. On 18 December, a political agreement was reached on implementing a common classification system in the European Union to define environmentally sustainable activities across sectors, known as the ‘Green Taxonomy’ for Europe.
The taxonomy will be transposed into national legislation as a first set of criteria covering activities that substantially contribute to climate change mitigation and adaptation, by the end of 2021. This means companies and their investors need to start preparing for an ambitious, globally oriented, transformative body of new legislation.
The goal of the taxonomy is to “provide clarity via a common language for investors, issuers, policymakers and regulators” to enable financing of the Paris Agreement commitments and associated environmental goals as well as the Sustainable Development Goals (SDGs). The taxonomy will also serve as a basis for the EU Green Bond Standard.
While initially designed for private investors, the taxonomy is also expected to become a reference point for public financial institutions, such as the European Investment Bank.
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