In March 2018, the European Commission (“EC“) published its Action Plan on Financing Sustainable Growth which set out a comprehensive strategy to further connect finance with sustainability. As part of its Action Plan, the EC committed to create standards and labels for green financial products. To that end it set up a Technical Expert Group on sustainable finance (“TEG“) to develop:
- an EU classification system – the so-called “EU Taxonomy” – to determine whether an economic activity is environmentally sustainable;
- an EU Green Bond Standard;
- methodologies for EU climate benchmarks and disclosures for benchmarks; and
- guidance to improve corporate disclosure of climate-related information.
In March 2020 the TEG published its final Report on Sustainable Finance for the EU Taxonomy (“TEG Report“), setting out the TEG’s final recommendations for the EC. The TEG Report contains recommendations to the overarching design of the EU Taxonomy as well as guidance for its users. In addition to the summary of the economic activities covered by the technical screening criteria, the TEG Report is supplemented by a technical annex containing a full list of technical screening criteria for economic activities which can substantially contribute to climate change mitigation or adaptation.
Additional technical screening criteria for the four remaining environmental objectives (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) will be developed by the Platform on Sustainable Finance in the next 20 months.
The TEG also published a Usability Guide on its proposal for an EU green bond standard (the “Guide“). The Guide aims to support potential issuers, verifiers and investors of EU Green Bonds and provides guidance reflecting the latest changes in the draft model of the EU GBS. It also details its approach to, amongst other things, the EU Green Bonds Standards (“GBS“), identifying eligible Green Projects; applying the EU Taxonomy at project level, the regional scope of the EU GBS and regulatory disclosure requirements.