AFME welcomes the Sustainable Finance package recently published by the European Commission ​

20 June 2023

It contains a number of important elements:  A legislative proposal for the regulation of ESG ratings providers to enhance the integrity, transparency, responsibility, good governance, and independence of ESG rating activities, contributing to the transparency and quality of ESG ratings. ..

• It lays down conditions for the provision of ESG ratings in the EU, principles for the integrity and reliability of ESG rating activities, transparency requirements of ESG ratings’ activities, obligations relating to the independence and conflict of interests of ESG rating providers, and ESMA’s powers with regard to the supervision of ESG rating providers.
• The final Delegated Act for the additional environmental criteria and expansions to the EU Taxonomy including:
  • Technical screening criteria (TSC) for economic activities making a substantial contribution to the four remaining environmental objectives (Taxo4);
  • Targeted amendments to the delegated acts specifying the Taxonomy’s reporting requirements; and
  • Targeted amendments and additions to the delegated acts specifying the TSC for climate change mitigation and climate change adaptation.
• A Communication taking stock of progress in the EU sustainable finance regulatory framework: The Communication places emphasis on the Commission’s work to enhance the usability and effectiveness of the EU Sustainable Finance framework. The Commission acknowledges implementation challenges, highlights work done and under way to seek to address these, but states that “Early analysis of reporting shows that the EU sustainable finance framework is beginning to work as intended, facilitating private finance for green and transition investments through transparency and as a comprehensive toolbox”. 
• A Staff Working Document on the usability of the EU Taxonomy presents an overview of the recent measures and tools put forward to address key implementation issues and questions raised by stakeholders regarding the usability of the EU Taxonomy. The Commission’s stated priority is helping market participants implement the EU Taxonomy and the overall framework, and to enhance its usability. Some further FAQs were also published on the Minimum Social Safeguards and on whether Taxonomy-aligned investments qualify as ‘sustainable investment’ under the SFDR.
• A Recommendation on transition finance: The Recommendation emphasizes the important role of transition finance in meeting the EU’s climate and environmental goals. It provides a definition of transition finance and aims to support transition finance through recommending approaches that can utilize sustainable finance tools and disclosures including the EU Taxonomy, transition plans, EU climate benchmarks and science-based targets. It makes recommendations for issuers, financial intermediaries, Member States and the ESAs, including that the ESAs take account of the recommendation when monitoring and supervising greenwashing risks.

AFME welcomes the emphasis from the European Commission on addressing usability and implementation challenges with the EU regulatory framework and the recognition of the need to ensure that this works effectively both to promote green finance but also to facilitate transition finance, which is vital to enable the EU to meet its climate and environmental objectives. We look forward to continuing to contribute to this important work. 

AFME

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