On 21 April, The European Commission has adopted an ambitious package of measures to help improve the flow of money towards sustainable activities across the EU by enabling investors to re-orient investments towards more sustainable technologies and businesses. The package will consist of:
- The EU Taxonomy Climate Delegated Act that will be formally adopted at the end of May, and it is a robust, science-based transparency tool for companies and investors;
- A proposal for a Corporate Sustainability Reporting Directive (CSRD) aims to ensure that companies report reliable and comparable sustainability information needed by investors and other stakeholders to improve the flow of sustainability in the corporate world. It will make sustainability reporting by companies more consistent; and
- Six amending Delegated Acts on fiduciary duties will ensure that financial firms include sustainability in their procedures.
The European Green Deal is Europe’s growth strategy that aims to improve the well-being and health of citizens, and these measures will be instrumental to make Europe climate-neutral by 2050, taking a leap forward with the first-ever climate taxonomy which will help companies and investors to know whether their investments and activities are really green.
Working For a Sustainable Green Economy
As part of that effort, companies need a comprehensive sustainability framework to change their business models accordingly. To ensure this, all elements of the package will enhance the reliability and comparability of sustainability information, thus putting the European financial sector at the heart of a sustainable and inclusive economic recovery from the COVID-19 pandemic. EU Taxonomy Climate Delegated Act creates a common language that investors can use when investing in projects that have a substantial positive impact on the environment, following extensive feedback from stakeholders, as well as discussions with the European Parliament and Council. This Delegated Act is a living document, and it will continue to evolve over time, in light of developments and technological progress.
A new Corporate Sustainability Reporting Directive Today’s proposal revises and strengthens the existing rules introduced by the Non-Financial Reporting Directive (NFRD), and it aims to create a set of rules that will bring sustainability reporting to all large companies and all listed companies. Companies will have to report on how sustainability issues, such as climate change, affects their business and the impact of their activities on people and the environment.
Many companies are currently under pressure to use an array of different sustainability reporting standards and frameworks. The proposed EU sustainability reporting standards should be a “one-stop-shop”, providing companies with a single solution that meets the information needs of investors and other stakeholders.
The approved six amendments encourage the financial system to support businesses on the path towards sustainability, as well as supporting existing sustainable businesses, strengthening EU’s fight against greenwashing.