The transition is “one of the most important elements which is lacking in the European [green finance] framework”, according to Patricia Plas, group director of public affairs at French insurance giant Axa.
Speaking to Responsible Investor, she described the EU’s “green” taxonomy – a classification system setting out what constitutes an environmentally sustainable economic activity – as the backbone of the bloc’s sustainable finance framework, one which sets out the “ultimate technical goal” in terms of investments.
“But obviously what we as society need to do, and what needs to be financed, is the transition,” Plas said. “The hole for the moment is how do you define that and where do you put the transition in the framework.”
Plas pointed to suggestions that the current taxonomy be extended to cover activities that would sit under “transition”.
In March, RI reported that members of the EU’s Platform on Sustainable Finance had made such a proposal. The advisory group’s “extended environmental taxonomy” would encompass a “red” performance category for environmentally harmful activities excluded by the green taxonomy and an “amber” or intermediate category for activities with low environmental and climate impact.
Plas said she understood the European Commission is expected to issue something on the topic in the coming months.
Corporate transition plans are currently mandatory under the EU’s Corporate Sustainability Due Diligence Directive, but Plas noted that they are “not yet defined” under the proposed legislation.
As to whether Axa supports a transition taxonomy, Plas told RI that the insurer is “a little bit agnostic where [transition] it should go in the framework in all honesty”. But she added: “It needs to be in the framework. It needs to be taken into account, that’s for sure.”
Pras concluded that while it’s “very useful to have your ultimate goal” and “courageous”, it would have been good “to conceptually think about also the transition – but that has not been done or thought about from the start”.
She added: “Now the question is, how do we in fact find a solution to that?”