On 13 June 2023, the European Commission (the Commission) published a sustainable finance package.
The package contains measures to build on and strengthen the foundations of the EU sustainable finance framework.
The aim of the package is to ensure that the EU sustainable finance framework continues to support companies and the financial sector, while encouraging the private funding of transition projects and technologies. Specifically, the Commission is adding additional activities to the EU Taxonomy and proposing new rules for Environmental, Social and Governance (ESG) rating providers, which will increase transparency on the market for sustainable investments.
Furthermore, the package aims to ensure that the sustainable finance framework works for companies that want to invest in their transition to sustainability. In addition, the package aims to make the sustainable finance framework easier to use, thereby continuing to contribute effectively to the European Green Deal objectives.
The package includes:
- Targeted amendments to the EU Taxonomy Climate Delegated Act, which expand on economic activities contributing to climate change mitigation and adaptation not included so far – in particular in the manufacturing and transport sectors. The Commission has also adopted amendments to the EU Taxonomy Disclosures Delegated Act, to clarify the disclosure obligations for the additional activities.
- A Commission Recommendation which illustrates how the sustainable finance framework encompasses transition finance and explains how companies, investors and financial intermediaries can voluntarily use the current sustainable finance framework to finance their transition to a climate neutral and sustainable economy, while enhancing their competitiveness, with practical examples and explanations.
- Staff working document on the usability of the EU Taxonomy and the wider EU sustainable finance framework provides an overview of the key pillars of the framework now in place, and takes stock of recently adopted usability.
The package also includes a proposal for a Regulation on the transparency and integrity of ESG rating activities.
The key aim of the draft Regulation is to increase transparency on ESG ratings methodologies, objectives, characteristics and data sources. It also aims to increase clarity on the operations of ESG rating providers, in particular to prevent and mitigate potential risks associated with conflicts of interest. The draft Regulation is based on the recommendations for ESG rating providers and regulators published by the International Organization of Securities Commissions in November 2021. It provides for the authorisation and supervision of ESG rating providers by the European Securities and Markets Authority. It also provides requirements on disclosures around their methodologies and objectives of ratings, and introduces principle-based organisational requirements on their activities.