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Germany to assess major European firms against EU Taxonomy

State-funded initiative to feed into development of EU Taxonomy and economic recovery plans

Germany will gauge the sustainability practices of major European companies to support capacity building and to enable the development of “sustainable, climate-friendly” economic recovery plans within the EU post-COVID19.

The German Federal Environment Ministry (BMU) is funding a research project to assess how the sustainability practices of major listed European companies stack up against the EU Taxonomy – a catalogue of green and sustainable activities developed by the EU to underpin its Sustainable Finance Action Plan, currently in draft form.

Nearly 430 companies have so far been invited to participate in the survey which will run until June 9.

The project – named the European Sustainable Finance Survey – will allow surveyed firms to address any gaps in alignment between its operations and the EU Taxonomy, and will “highlight the challenges and solutions” in developing the Taxonomy further.

Presently, the Taxonomy is focused on climate change mitigation and adaptation – the first two of six environmental objectives which it will eventually encompass. The remaining objectives are sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems.

Regulations which set out the technical detail for compliance with the Taxonomy are expected to enter into force by the end of 2021 for the two climate change objectives, and by the end of 2022 for the remaining four objectives.

This is the first time that the sustainability practices of the major listed companies represented in the 14 main benchmark indices in the EU will be assessed, said the BMU.

In addition, the survey aims to “provide a better understanding of how future-oriented, sustainable economic recovery programmes must be designed”.

Germany will likely have some influence on the final form of the Taxonomy and on any pan-European plans to reboot the economy once it takes over the presidency of the EU Council – one of the three EU legislative bodies which comprise member state governments – in July. Croatia currently holds the presidency.

According to a statement announcing the initiative, the BMU said Germany will use the upcoming presidency to “diligently advance European climate action – green recovery and the Green Deal”.

The project’s launch comes soon after the close of a public consultation for Germany’s own national-level green finance strategy. The strategy development is being led by a government-appointed Sustainable Finance Advisory Council (SFC) drawn from the financial sector, industry and civil society; and is headed by Karsten Löffler, Co-Head of the Frankfurt School of Finance and Management.