A EU taxonomy to foster sustainable finance
On 17 December, the European Parliament and the Council reached a political agreement on the text of a Regulation on the creation of a classification system, or taxonomy, for sustainable economic activities[1]. The Taxonomy Regulation did not create an exhaustive list of environmentally sustainable economic activities, but instead provided a framework for the progressive development of criteria to qualify an economic activity as sustainable[2].
The Regulation is part of the broader EU strategy to foster the role of the private sector, and namely the financial system, in tackling climate change and limiting global warming to a level below 2° C. This Regulation represents one of the measures that the European Commission identified in the “Action Plan: Financing Sustainable Growth” as necessary to reorient capital flows towards sustainable investment to achieve a sustainable and inclusive economic growth[3]. Indeed, the European Commission noticed that the lack of clarity among financial actors on what constitutes an environmentally sustainable investment was one of the major factors behind the low investment rates in sectors that can contribute to achieve the EU climate and energy targets.
For the purposes of the Regulation, an economic activity can qualify as environmentally sustainable when it substantially contributes to achieve one of the six objectives laid down in the Regulation, i.e. climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, protection and restoration of biodiversity and ecosystems[4]. In addition, such economic activity should not cause a significant harm to any other environmental objective; it should comply with robust and science-based technical screening criteria, and with minimum social and governance safeguards, such as those set out in the UN Guiding Principles on Business and Human Rights and the ILO’s declaration on Fundamental Rights and Principles at Work[5].
The Regulation does not per se exclude from its scope of application activities for which there are no low-carbon alternatives. These activities can still be qualified as environmentally sustainable under the Taxonomy if they are consistent with the pathway to limit the temperature increase to 1.5° C above pre-industrial levels and fulfil the following conditions: the greenhouse emission levels correspond to the best performance in the sector or industry; the activity does not hamper the development or deployment of low-carbon alternatives; it does not lead to a lock-in in carbon-intensive assets considering the economic life-time of these assets[6].
The Regulation applies to both Member States and the EU’s institutions when they adopt measures laying down the requirements concerning financial products or corporate bonds made available by financial market participants or issuers as environmentally sustainable[7]. At the same time, financial market participants or issuers will be required to disclose information on how and to what extent their investments support economic activities that meet the criteria for environmental sustainability under the Regulation[8]. Financial and non-financial companies falling under the scope of the Non-Financial Reporting Directive will have to disclose information on how and to what extent their activities are associated with environmentally sustainable economic activities[9].
The classification system will be developed through delegated acts, which will be adopted in two batches: one on the climate-related objectives, to be adopted by 31 December 2020[10], and the second on all the other objectives, to be adopted by 31 December 2021. Both delegated acts will start applying one year after their entry into force (respectively as of 31 December 2021 and 31 December 2022), in order to allow both public authorities and private actors to familiarise with the criteria[11].
This Regulation confirms that there is being a shift in relation to the identification of the measures that would best reduce the negative impacts of climate change. For decades the EU, as well as the UN, have tried to engage States in the fight against climate change and set greenhouse gas emission targets targets they had to meet. Nowadays, it is becoming evident that the actions taken by States are insufficient to limit global warming and that public investments are not enough to finance climate adaptation and mitigation projects. As a result, the EU is trying to increasingly encourage the private sector to invest in sustainable infrastructure projects to tackle the effects of climate change and help the EU meet its 2030 and 2050 targets. The key role the private sector has to play in financing the so-called “green transition” has been further underscored when the EU Commission launched the International Platform on Sustainable Finance in October 2019[12]and presented the EU Green Deal on 11 December 2019[13].
It is too early to predict whether this Regulation, together with other measures the EU is planning to take to increase private investment in climate change, will be able to channel the investment needed to transit to a low carbon economy. However, if properly implemented, it can certainly be regarded as a promising measure to boost financial actors’ involvement in the fight against climate change.
[1] Council of the EU, Sustainable finance: EU reaches political agreement on a unified EU classification system”, press release at https://www.consilium.europa.eu/en/press/press-releases/2019/12/18/sustainable-finance-eu-reaches-political-agreement-on-a-unified-eu-classification-system/.
[2] Regulation on the establishment of a framework to facilitate sustainable investment, and amending Regulation 2019/2088 on sustainability-related disclosures in the financial services sector, at .
[3] European Commission, “Action Plan: Financing Sustainable Growth”, at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52018DC0097.
[4] Article 5, Regulation on the establishment of a framework to facilitate sustainable investment, and amending Regulation 2019/2088 on sustainability-related disclosures in the financial services sector.
[10] Article 6, para. 4; article 8, para. 4.
[11] Article 9, para. 4; article 10, para. 4; article 11, para. 4.
[12] European Commission, International Platform on Sustainable Finance, at https://ec.europa.eu/commission/presscorner/detail/en/QANDA_19_6116.
[13] European Commission, The EU Green Deal, at https://ec.europa.eu/info/sites/info/files/european-green-deal-communication_en.pdf.
Laureata in Giurisprudenza all’Università di Bologna nel 2013 con 110 e lode con tesi in diritto internazionale, consegue nel 2016 doppio Master in Diritto Internazionale alla Facoltà di Legge dell’Università di Georgetown e in Politiche Ambientali alla Scuola di Affari Internazionali di Parigi – SciencesPo.
Ha completato tirocini al Tribunale Speciale per il Libano a L’Aia, al Center for International Environmental Law a Washington D.C. e alla Commissione Europea a Bruxelles. Ha lavorato per due anni in quanto consulente per compagnie multinazionali, associazioni di imprese e organizzazioni non governative in una compagnia di public affairs e comunicazione a Brussels, specializzandosi in sostanze chimiche, economia circolare, sostenibilità, product design, settore tessile, commercio internazionale e diritti umani.
È iscritta all’Ordine degli Avvocati di Bologna da Ottobre 2020 e, da gennaio 2021, all’Ordine degli Avvocati di Bruxelles in quanto avvocato stabilito.
Lavora come Associate presso Fieldfisher LLP., a Bruxelles, nel dipartimento EU Regulatory, Competition and Trade, dove si occupa della legislazione europea in materia di sostanze chimiche, prodotti fitosanitari, legislazione sul prodotto e dispositivi medici.
