European Commission publishes a sustainable finance package

from Scotland Europa: https://scotlandeuropa.com/alerts/650

The European Commission has published a package demonstrating how the EU sustainable finance agenda can support the financial sector. This includes encouraging private funding of transition projects and technologies and facilitating financial flows toward sustainable investments and has been done through changes to the EU taxonomy, a cornerstone of the EU’s sustainable finance framework. This classification system defines criteria for economic activities that are aligned with a net zero trajectory by 2050 and the broader environmental goals going beyond climate. The new set of EU Taxonomy criteria, which allows financial and non-financial companies to share a common definition of economic activities, will make a significant contribution to wider objectives such as the sustainable use and protection of water and marine resources, the transition to a circular economy, pollution prevention and control, protection and restoration of biodiversity and ecosystems. New Environmental Delegated Act and the Climate Delegated Act, as well as a new proposal for a regulation on Environmental, Social, and Governance (ESG) ratings. This would ensure that ESGs’ rating assesses the characteristics of a company in a standardised way. Currently, ESG ratings are assessed through private providers, leading to a lack of trust from investors on the quality of ESG ratings. Under the new regulation, ESG ratings will need to be authorised and under supervision to ensure quality control. Responding to this package, the World Wildlife Fund (WWF) published an article welcoming the package, with a Senior Economist from the WWF saying it sends a “clear signal” that sustainability cannot wait. There is concern that since the EU Taxonomy is not a mandatory list of activities to invest in, this package will have a mitigated effect.

full article and more here: https://finance.ec.europa.eu/publications/sustainable-finance-package-2023_en