European Commission’s new sustainable finance framework measures

Here’s a note from Nina Gardner:

The Europeans keep working at getting the sustainability transition right – including enhancing the reliability of ESG ratings…the US has a lot of catching up to do.

That talks about this note from Inna Amesheva:

Today, the European Commission introduced a new package of measures to enhance the EU sustainable finance framework. The package aims to support companies and the financial sector in their transition to sustainability and promote private funding for green projects. The key elements of the package include:

⦿ EU Taxonomy Delegated Acts: The Commission has proposed new criteria for activities that contribute to non-climate environmental objectives such as water and marine resources, circular economy, pollution prevention, and biodiversity protection. Amendments have also been made to include more economic activities related to climate change mitigation and adaptation. These additions will expand the usability of the EU Taxonomy and stimulate sustainable investments in the EU.

⦿ Regulation of ESG Ratings Providers: The Commission has proposed a regulation to enhance the transparency and reliability of ESG ratings. The regulation introduces organizational principles and rules to prevent conflicts of interest among ESG rating providers. Additionally, ESG rating providers offering services in the EU might require authorization and supervision by the European Securities and Markets Authority (ESMA) to ensure the quality of their services and protect investors.

⦿ Enhancing Usability: The Commission is taking measures to address implementation issues and enhance the usability of the EU Taxonomy. They have developed targeted initiatives and published the EU Taxonomy User Guide, which provides guidance for non-experts. Companies across various sectors are increasingly using the EU Taxonomy in their transition efforts, indicating positive trends.

⦿ Transition Finance: The package includes recommendations on transition finance to guide companies and the financial sector in utilizing the EU sustainable finance framework to channel investments into sustainability and manage climate-related risks. It aims to facilitate transition finance for companies at different stages of sustainability performance, including small and medium-sized enterprises.

The EU #Taxonomy Delegated Acts and the proposed regulation for #ESGratings providers will undergo scrutiny by the European Parliament and the Council of Europe before adoption. The package aligns with the ongoing efforts to establish sustainability reporting standards for companies, further advancing the transition to a sustainable EU economy.