EFAMA: EU Taxonomy at risk of hampering green housing investments
22 December 2020
As the voice of the European asset management industry, EFAMA strongly welcomes the development of the EU Taxonomy and its proposed technical screening criteria in the Delegated Acts.
EFAMA sees the Taxonomy as a critical tool to unleash
the potential of sustainable finance in Europe by assisting issuers, project promoters,
companies, investors, and other financial market participants in identifying
truly sustainable economic activities.
The
Delegated Acts will make the EU Taxonomy operational by determining which
investments substantially contribute to climate change mitigation and
adaptation, while avoiding harm to other environmental or social objectives.
The technical screening criteria will be fundamental in guiding investment
decisions of financial market participants and, increasingly so, public
authorities. Moreover, given the scale of the EU internal market, the
Taxonomy is likely to have an impact also in non-EU jurisdictions.
To that effect, EFAMA voices a few key concerns regarding
the current proposal for the Delegated Acts by the European Commission: - For the Taxonomy to have a
positive impact on cost reduction for sustainable housing and green real
estate development, the proposed criteria for construction, renovation and
ownership of buildings need to be revised. The current proposal would be
detrimental to the decarbonization of EU´s building stock by restricting the
issuance of Taxonomy aligned green bond volumes. The stringency and lack of
economic viability of the criteria would be particularly counterproductive
for the covered bond and green mortgage bond markets.
- Taxonomy alignment at the time of
issuance of the financial product or instrument should apply for the
product's entire duration, or for a sufficient period of time to mitigate
concerns over future technical screening criteria non-alignment. The current
proposal foresees a well-intentioned, science-based review of technical
screening criteria every three years, which could lead to concerns by
investors over the future Taxonomy alignment of financial products with
longer timeframes of the underlying investment projects.
- Due to the ESG data challenge, the
current timeline for application of Taxonomy disclosures continues to pose a
serious challenge. We recommend readjusting the disclosure timelines to
ensure a more practical and seamless sequencing between the reporting done by
companies and asset managers. As users of disclosure information, asset
managers must be able to rely on reliable and comparable company disclosures.
We are concerned that most companies will not be ready to implement the
new disclosure requirements on 1 January 2022, leaving financial market
participants with no option but to rely on estimates and third party
screenings. In this context, we also call on the European Commission to
clarify the conditions under which market participants can rely on due
diligence screening produced in-house and acquired from external data
providers.
- In order to address the problem of
insufficient availability of meaningful, reliable, comparable, and public ESG
data, we suggest that the European Commission focuses on the following
points: prioritising the revision of and extend the scope of non-financial
reporting (NFRD), developing European reporting standards, supporting greater
reliance on third party verification and advancing the European Single Access
Point.
Given
the globalized nature of financial markets, EFAMA also suggests increasing
the international relevance of the EU Taxonomy and leading a conducive
dialogue with jurisdictions showing interest in sustainable finance policies.
The role of the International Platform on Sustainable Finance could be key in
this respect.The
full public consultation response of EFAMA can be found 
here.
EFAMA
© EFAMA - European Fund and Asset Management Association
