The European Commission’s technical expert group (TEG) on sustainable finance published its final recommendations for a taxonomy of environmentally sustainable activities. This is to facilitate the Commission's ongoing efforts to harness the financial sector for its fight against climate change.
The main recommendation sets out technical screening criteria for 67 economic activities that can contribute substantially to climate change mitigation across sectors such as agriculture, forestry, and manufacturing. Additionally, it includes a methodology and worked examples for evaluating contributions to climate change adaptation, guidance, and case studies for investors preparing to use the taxonomy. According to the TEG, for the taxonomy to work in practice, investors will need data about a company or an issuer performance based on the taxonomy activity criteria.
The taxonomy proposed by the TEG includes economic activities that are already low carbon as well as transition activities, such as steel or cement manufacturing. The inclusion of transition activities is a fine example of how TEG’s taxonomy proposal had evolved. According to the Commission, including transitional activities was needed to compile the most comprehensive classification system for sustainable activities to date.
The final recommendations published by the Commission are a supplement to the general guidelines on the directive that were published in June 2017. It is worth noting that the publication comes as political agreement on a taxonomy regulation by the European Union Council and the European Parliament remains outstanding.
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