Please see below on the timing of its application. The Recitals to the Taxonomy Regulation state that, when complying with the minimum safeguards set out in the Taxonomy Regulation, entities should adhere to the principle of "do no significant harm" as established under the Disclosure Regulation and take into account the forthcoming regulatory technical standards thereunder. This is intended to alleviate the burden on investors' own due diligence with regard to a product's environmental sustainability and eliminate the practice of greenwashing (where financial products are inaccurately marketed as "green" or "sustainable"). This is a significant development given the breadth of ambition of the European Commission (the Commission) represented by the Taxonomy Regulation. The Taxonomy Regulation establishes a framework to facilitate sustainable investment, introducing an EU-wide … contributes substantially to one or more of the Environmental Objectives, or directly enables other activities to make a substantial contribution to one or more of them; does not significantly harm any other Environmental Objective; complies with applicable technical screening criteria (. Provided below is an overview of what you should know about the EU Taxonomy, Sustainable Finance Strategy, and respective next steps. Please try after sometime. Readers should take legal advice before applying it to specific issues or transactions. The final act was published in the Official Journal on 22June, ... Proposal for a regulation of the European Parliament and of the Council on the establishment of a framework to facilitate sustainable investment . – As the Commission has made clear:14 “The regulation can be seen as a framework, which allows for the progressive development of [the list of environmentally This highlights the high level of crossover between these two fundamental EU sustainability-related regulations. is carried out in compliance with certain safeguards. On 22 June 2020, the long-awaited Regulation (EU) 2020/852 on the establishment of a framework to facilitate sustainable investment (the “EU Taxonomy Regulation”), and amending Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (the “SFDR”) was published on the Official Journal of the European Union. The activity contributes substantially to protecting, conserving or restoring biodiversity and to achieving the good condition of ecosystems, or to protecting ecosystems that are already in good condition, through certain prescribed means, including, for example, sustainable land use and management. It shall take effect the day following the publication of the decision in the Official Journal of … – The Taxonomy Regulation became effective 20 days after its publication in the Official Journal – ie on 12 July 2020. Having a deep understanding of our clients' industries and the challenges that they face is key to delivering excellent legal advice. The economic activity contributes substantially to waste prevention, re-use and recycling, through certain prescribed means, including, for example, by improving the recyclability of certain products. ... unified EU taxonomy and the related concept of environmentally sustainable investment. In essence, financial market participants are institutional investors and asset managers18. The Taxonomy Regulation 1 was published in the Official Journal of the EU on 22 June 2020, following its adoption by the European Parliament on 18 June 2020 and entered into force on 12 July 2020. On 18 June 2020, the European Parliament adopted the regulation on the establishment of a framework to facilitate sustainable investment [1] (the Taxonomy Regulation), a milestone in the EU’s Action Plan on Sustainable Finance (the Action Plan). The final piece of the puzzle are the Delegated Acts. the proportion of capital expenditure and the proportion of operating expenditure related to assets or processes associated with economic activities that qualify as environmentally sustainable. What is its scope and impact? The Taxonomy Regulation also amends the Disclosure Regulation (see our briefing here), inserting an obligation for the European Supervisory Authorities to develop technical standards thereunder specifying the details of the "do no significant harm" principle, as expressed in the Disclosure Regulation. The Taxonomy Regulation applies to: 1. The Taxonomy Regulation will enter into force on 12 July 2020, so it will be fully in effect before the Brexit transition period ends (i.e., midnight GMT on 31 December 2020). However, on June 18, 2020, the presidents of the European Council and Parliament announced that they had signed the EU Taxonomy Regulation into law, which was published in the EU’s Official Journal just four days later, heralding a new era of financial regulation. The new disclosure obligations will apply from 1 January 2022 or 1 January 2023, depending on the Environmental Objective to which they relate. At Ashurst, we believe innovation means only one thing: continuous and disruptive improvement in all that we do - for the benefit of our clients, our employees and our wider corporate social responsibility. Firms should consider the impact that the Taxonomy Regulation and Disclosure Regulation will have on at both entity and product level. For additional coverage on financial and regulatory news, visit Bridging the Week, authored by Katten’s Gary DeWaal. Regulation (EU) 2020/852 (the ‘Taxonomy Regulation’) was published in the Official Journal on 22 June 2020 and entered into force 20 days later. The EU-wide green taxonomy set out by the Taxonomy Regulation represents one pillar of the regulatory proposals under the Action Plan and is due … The Taxonomy Regulation was published in the Official Journal four days later, thereby ushering in a new era of financial regulation. Neither authors nor readers have to pay fees. Economic Secretary to the Treasury, Sir John Glen, confirmed that the UK would retain the taxonomy framework, including the high-level environmental objectives. The Sustainable Finance Taxonomy Regulation was published in the Official Journal of the European Union on 22 June 2020 and came into force on 12 July 2020. It is expected that the detailed delegated acts which will underpin the Taxonomy Regulation will not be published before the end of the transition period. This site uses cookies to offer you a better browsing experience. All articles published in EJT are compliant with the different nomenclatural codes. However, he confirmed that, as the details to be set out in the future delegated acts will not be known in advance of the end of the transition period, the UK government would not commit at this stage to confirm the extent to which UK law will align with EU law in this area thereafter. It shall apply, from January 01, 2021, to the annual financial reports containing financial statements for financial years beginning on or after January 01, 2021. We use cookies to improve your experience on our website. Please see below on the timing of its application. The Taxonomy Regulation also mandates the establishment of a "Platform on Sustainable Finance" (the Platform), which will include representatives of various EU bodies (including the European Environment Agency and the European Supervisory Authorities), environmental experts, and accounting and reporting experts. advising the Commission on the Technical Screening Criteria and on the need to update these; analysing requests from stakeholders to develop or revise Technical Screening Criteria; advising on the possible role of sustainability accounting and reporting standards in supporting the Technical Screening Criteria; monitoring and reporting to the Commission on trends at EU and Member State level regarding capital flows into sustainable investment; and. sustainable use and protection of water and marine resources; protection and restoration of biodiversity and ecosystems. Directive 2013/34/EU. The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Taxonomy Regulation published in the EU Official Journal, Article 2a added to the SFDR by Article 25 of the Taxonomy Regulation Documentation Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in … The Taxonomy was published in the Official Journal of the EU on 22 June, following its adoption by the European Parliament on 18 June 2020. The TEG's final report and supplementary technical annex on the taxonomy, published in March 2020, provide recommendations relating to its overarching design, as well as guidance on making disclosures using the taxonomy. Council's first reading position on the taxonomy of sustainable activities Article 8 of the Regulation obliges undertakings covered by Directive 2014/95/EU (the ‘Non-Financial Reporting Directive’) to … Final report of the TEG on the EU taxonomy In order to inform its work on the action plan, including on the EU taxonomy, the European Commission established a Technical Expert Group (TEG) on sustainable finance in July 2018. As a reminder, is a tool to help investors, companies, issuers and project promoters navigate the transition to a low-carbon, resilient and resource-efficient economy. The first set of Technical Screening Criteria, for activities which substantially contribute to climate change mitigation or climate change adaptation, will apply from 1 January 2022. For more information on the Taxonomy Regulation, please see the January 10, 2020 edition of Corporate & Financial Weekly Digest. The EU Taxonomy Sign up to receive the latest legal developments, insights and news from Ashurst. After today's vote and the signature of the text, the Taxonomy Regulation will be published in the Official Journal and enter into force in its entirety 20 days after its publication. The activity contributes to greenhouse gas stabilisation consistent with the goals of the Paris Agreement, through certain prescribed means including, for example, the generation of renewable energy. The Taxonomy Regulation is available here. The activity must comply with the relevant Technical Screening Criteria to be set out in delegated acts that will be introduced over time, as discussed above. The Regulation establishes a precise EU-wide classification framework to identify economic activities and investments that can be treated as environmentally sustainable2. The Taxonomy Regulation also amends the EU Regulation on Sustainability‐Related Disclosures in the Financial Services Sector (the Disclosure Regulation)1, introducing new disclosure obligations for a wide range of entities, including financial market participants and large non-financial companies. All official European Union website addresses are in the europa.eu domain. The Taxonomy Regulation also amends the EU Regulation on Sustainability‐Related Disclosures in the Financial Services Sector, introducing new disclosure requirements for a range of entities, including financial services firms and large public interest companies. However, in their proposed Level 2 draft guidance, the European Supervisory Authorities have highlighted that the Taxonomy Regulation overlaps in parts with the Disclosure Regulation and that there are some problematic inconsistencies. "Financial market participants" who offer "financial products": financial market participants (as defined in the Disclosure Regulation, and including most insurance, pension and portfolio management providers) will be required to provide in pre-contractual disclosures … The Taxonomy Regulation now needs to be adopted by the European Parliament at second reading, before it is published in the EU Official Journal. 1. Taxonomy Regulation published in OJ. On 22 June 2020, there was published in the Official Journal of the EU ( OJ) Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, … We bring together lawyers of the highest calibre; progressive thinkers driven by the desire to help our clients achieve business success. The activity includes adaptation solutions that substantially reduce the adverse impact (or the risk thereof) of the current and expected future climate on either (i) other people, nature or assets or (ii) the economic activity itself, in each case without increasing the risk of an adverse impact on other people, nature and assets. The activity must be carried out in alignment with the OECD's Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights. The Taxonomy Regulation sets out the criteria for determining whether an economic activity constitutes an environmentally sustainable activity. The Proposed Taxonomy Regulation envisages two main mandatory users of the taxonomy17: 1. member states and the EU when setting rules about financial products or corporate bonds that are marketed as environmentally sustainable; and 2. financial market participants offering financial products as environmentally sustainable investments (or as investments having similar characteristics). The activity substantially contributes to achieving the good status of water bodies or marine resources, or to preventing their deterioration when they are already in good status, through certain prescribed means, including, for example, through waste water management. On June 22, the Taxonomy Regulation was published in the Official Journal of the European Union and it will go into effect on July 12, 2020. Sustainable use and protection of water and marine resources. If you have forgotten your password, you can request a new one here. After reaching a political agreement in December 2019, the EU’s Regulation 2020/852 on the establishment of a framework to facilitate sustainable investment (“Taxonomy Regulation”) was published in the Official Journal on 22 June 2020. Our people are experts of law; progressive thinkers, in tune with economic, political and market conditions, driven to help to provide the clear commercial advice you need to achieve business success. This is evident in the insightful material we produce and news coverage we receive. The new disclosure requirements will apply from 1 January 2022 or 1 January 2023, depending on which Environmental Objective is targeted. The Taxonomy Regulation also accommodates activities for which there is no technologically and economically feasible low-carbon alternative but which nevertheless support the transition to a climate-neutral economy in a manner consistent with a pathway to achieving the Paris Agreement goal of limiting the global temperature increase to 1.5 degrees Celsius above pre-industrial levels. The Taxonomy Regulation establishes a framework to facilitate sustainable investment, introducing an EU-wide taxonomy of environmentally sustainable activities. It has since been published in the Official Journal and entered into force on 12 July 2020. On 22 June 2020, the EU Regulation on the Establishment of a Framework to Facilitate Sustainable Investment (widely referred to as the Taxonomy Regulation) was published in the Official Journal of the EU, marking a significant step in the realisation of the European Commission's Action Plan on Financing Sustainable Growth (the EU Action Plan). The delegated acts on the remaining four Environmental Objectives are required to be adopted by the Commission by 31 December 2021 and will apply from 1 January 2023. See all EU institutions and bodies. 25 June 2020. The Taxonomy Regulation will come into force on 12 July 2020, but many key provisions will not apply until a later date, by which time additional detail will have been developed by way of delegated acts. Draft standards are to be provided to the Commission by 30 December 2020. EU Regulation 2019/2088 Context and objectives . You may unsubscribe at any time. The regulation now needs to be adopted by the European Parliament at second reading before it can be published in the Official Journal and enter into force. We bring together lawyers of the highest calibre with the technical knowledge, industry experience and regional know-how to provide the incisive advice our clients need. The final Regulation is expected to be published in the Official Journal in May 2020. The Taxonomy Regulation will come into force during the transition period, and will therefore form part of the body of retained EU law at the end of such period. The Taxonomy Regulation imposes additional requirements on large public interest entities (including credit institutions and insurance companies) which are subject to requirements under the EU Non-Financial Reporting Directive.2  The new requirement, which will apply from 1 January 2022 or 1 January 2023 depending on the Environmental Objective, is for any such entity to include in its non-financial statements or consolidated non-financial statements information on how and to what extent its activities are associated with economic activities that qualify as environmentally sustainable under the Taxonomy Regulation. Regulation 2020/1989 shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. 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