UniCredit - The EU Taxonomy: a booster for Sustainable Finance

The EU Green Deal launched in December 2019 represents a massive package of initiatives to transform the entire European economy and achieve the net-zero emissions target by 2050.

A corner stone for the achievement of the EU environmental goals is the Directive 2020/852 which defined the framework for a common language that allows companies and investors to communicate their green activities with greater credibility and guides them in the ongoing transition. In addition, the EU Taxonomy is a key element of the upcoming EU Green Bond Standard as well as the EU Ecolabel for the retail investment products.

The architecture of the taxonomy has already been defined but its implementation is still underway through the approval of delegated acts. A first important milestone was the publication in June 2021, of the first delegated acts that identified a list of economic activities that contribute significantly to the environmental objectives of the European community and in particular the objectives of climate change mitigation and climate change adaptation. The consultation process was very long and complex due to the huge number of feedbacks received, sometimes representing the conflicting positions of those who asked for the definition of more ambitious criteria and those who wished a more gradual transition with criteria that are easier to apply. Certain activities like Gas and Nuclear were temporally excluded from the delegated act; they will be subject to further analysis and a final decision of the Commission is expected by the end of 2021.

Other delegated acts are expected to come in the next years. By the end of 2021 it is expected to have completed the definition of the activities which significantly contribute to the remaining four EU environmental objectives: sustainable use of water & marine sources, circular economy, pollution prevention, and healthy ecosystems & biodiversity. Furthermore, the Platform on Sustainable Finance, which is the advisory body in charge of assisting the Commission in developing its sustainable finance policies, is working to the extension of the EU Taxonomy to other activities not yet included.

The Green Deal emphasizes the European commitments on environment and climate change. However, the Social dimension is embedded in the EU Taxonomy regulation since the Commission intends to promote a just transition. The article 18 of Directive 202/852 defines the Social Minimum safeguards which represent a fundamental part of the screening criteria the activities aligned to the taxonomy have to meet. The relevance of the Social dimension is also demonstrated by the publication, on July 2021, of the draft report for the Social Taxonomy, which it is aimed at extending the Taxonomy to activities which substantially contribute to achieving social objectives.   

Transparency is another key element of EU Taxonomy regulation. The article 8 of Directive 202/852 requires that companies subject to the Non-Financial Reporting Directive disclose information on the alignment of their activities with the taxonomy. On July 2021, the EU Commission published the delegated act that defines what kind of information must be published, the rules to be followed and the timeline.

These first achievements represent the preliminary steps of a long journey which is now made clear to all the stakeholders and this is an important prerequisite to effectively direct private investment towards economic activities that can make a significant contribution to the achievement of the EU environmental objectives.

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