The European Commission moved another step closer to turning the EU’s green taxonomy into law yesterday as Member States signed off on legislation after months of political wrangling.
In another vote on the same day, the Technical Expert Group on Sustainable Finance (TEG) – the 35-strong group of investors, academics, corporates, membership groups and others – agreed to remain in place for another nine months to help with the implementation of the taxonomy.
Since it was created last year, the TEG has provided technical advice to the Commission on four areas: the taxonomy, corporate disclosures, green bond standards and integrating sustainability into benchmarks. Its mandate was due to end earlier this year, but was extended until the end of 2019, and now the Commission has asked it to remain until next September as the climate-focused pillars of the taxonomy – agreed yesterday – are taken forward.
RI outlined the key outcomes of the taxonomy’s political negotiations earlier this month and little has changed over recent weeks: pushback from France and the UK in the final stage of the negotiations prompted some rewording around the potential inclusion of nuclear and the do-no-significant harm element of the taxonomy, but overall the deal looks to remain a massive success for the Commission – despite attempts by Council, lobbyists and some MEPs to water it down over the past year.
The deal still needs to be formally signed off by European Parliament, which is not expected to be complete until February, but this is understood to be a procedural process, as Parliament already confirmed on Monday night that it supported the final text.
Platform on Sustainable Finance
One of the big next steps that can now be taken is to do with the long-awaited Platform on Sustainable Finance. The taxonomy legislation requires the Commission to recruit representatives from finance and business, accounting and reporting experts, civil society, ESG specialists and academics to form the platform, which will perform a similar role to the current TEG, but will be permanent, more formal and will focus almost entirely on the taxonomy.
It will advise the Commission on how to develop the next four environmental pillars: biodiversity, pollution prevention, the circular economy and water. Representatives from the European Environment Agency, the European Supervisory Authorities, the European Investment Bank, the European Investment Fund and the EU Agency for Fundamental Rights will also need to be at the table, according to the legal agreement.
The application process is expected to kick off early next year, with hopes the Platform will be up and running by the summer. The TEG to stay active until then.
According to the Commission’s recently-published Green Deal, the Action Plan on Sustainable Finance will be updated in the third quarter of next year. Nothing in the current package is expected to be removed or scaled back, but more objectives will be added to bolster the agenda. A consultation is expected in February.
In further signals that the EU will widen its ESG net to cover other environmental and social issues beyond climate in coming years, the Commission confirmed that the next European Semester – the six-monthly agreement among member states about what to prioritise in their fiscal and budgetary decision-making – will integrate the Sustainable Development Goals for the first time.