On 18 June 2019 the European Commission published a series of guidelines and reports as part of its action plan on sustainable finance (the “Action Plan”). In the action plan, the EC had suggested that a target of 25% of EU expenditure should contribute to climate objectives between 2017 and 2021.
Following finalisation in 2015 of the Paris Climate Agreement (“PCA”) and the United Nation’s 2030 Agenda and Sustainable Development Goals (“2030 Agenda”), the European Commission drafted the Action Plan on Sustainable Finance which addresses the climate change commitments and goals detailed in the PCA and the 2030 Agenda. To further this task, the European Commission established a High-Level Expert Group on sustainable finance which was created to develop core principles for a structured sustainable finance market. Furthermore, the group issued a series of key reports and recommendations on that basis.
One of the main documents released by the Technical Expert group was the taxonomy for environmentally-sustainable economy activities, released on 18 June 2019. Although voluntary, the taxonomy provides clear criteria as to whether or not an activity will qualify as being environmentally sustainable. It’s criteria includes that (i) it must contribute substantially to one of the six EU environmental objectives (climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, waste prevention and recycling, pollution prevention and control, and protection of healthy ecosystems), (ii) cannot cause significant harm to any of the objectives, (iii) must meet minimum social safeguards and (iv) must comply with technical screening criteria.