Mr. Ingman is a qualified barrister and solicitor, graduating with distinction from law school, business school (MBA), and university earning an LLM in Law and Finance from Kings College, London. Provide clarity on what it takes, within specific industries, to achieve the commitments made under … Rather, it will make it easier for companies with sustainability policies to raise funding for their projects, if they meet the criteria set out in the taxonomy. The EU Green Deal is Von der Leyen Commission’s program aiming to make Europe’s economy more sustainable. This classification system can also be used on a voluntary basis by any other market actors, other than those captured by the Non-Financial Reporting Directive. As such, it was decided that a broader ESG taxonomy would be hammered out after the environmental system went live. Should the NFRD be modified, practice would match principle, as set out in the simplified diagram below. It provides tools to ... are a combination of a narrative explanation and proportion of underlying investments that are taxonomy-aligned expressed as a percentage The Taxonomy is one of these, and is linked to the other actions that the EU TEG has been working with. Nevertheless, earlier in the year, one of the two largest credit rating agencies noted that “a lack of standardization of definitions and processes” was impeding the growth of the ESG sector. A full evaluation of economic activities that can substantially contribute to one or more of these four objectives will be completed by this yet to be established “Platform on Sustainable Finance”. This section sets out the role and importance of sustainable finance in Europe from a policy and investment perspective, the rationale for the development of an EU Taxonomy, the daft regulation and the mandate of the TEG. Moreover, the term “taxonomy,” whilst somewhat oblique, is apposite since, at its simplest, the regulation is a classification system that identifies whether economic activities are sustainable from an environmental perspective. The climate mitigation criteria for 72 economic activities have been updated / completed. The EU Green Deal is the Von der Leyen Commission’s program to make Europe’s economy more sustainable. Further granularity will be given in technical screening criteria, which will be built up over time and are to be updated on a regular basis to reflect the changing nature of the science and technology that underpin them. What does the proposed EU Taxonomy mean? A unified taxonomy and the monitoring of sustainab ility of investments will support the uptake of sustainable finance in the European financial sector. Struggling with the question of “what is a taxonomy” as it applies to your WordPress site? On 9 March 2020, the TEG published its final report on EU taxonomy. Helena Viñes Fiestas, global head of stewardship and policy at BNP Paribas Asset Management and a member of the TEG, said: “The Taxonomy is a game changer. Taxonomy is one of those subjects that seems very straightforward. The EU Taxonomy is a tool to help investors, companies, issuers and project promoters plan and report the transition to an economy that is consistent with the EU’s environmental objectives. By providing asset owners with the data they need, it will unleash a flow of capital to sustainable investments. FactSet Hong Kong Limited And hey, students are great at this, give them a little mnemonic to help them remember it (King Phillip Came Over For Great Soup) and you can have them chanting the system in no time. In order to reach the goals of climate neutrality, sustainable economic growth, and inclusion of all countries, a classification system … However, only time will tell if the lack of legal authority behind the proposed ruleset will prevent it from superseding the EU taxonomy as the default global ESG standard. The EU Sustainable Finance Technical Expert Group’s (TEG) March 2020 Final Report and Annex sets out detailed proposals for the first tranche of delegated legislation, covering the first two objectives, which must be published by December 31, 2020. For example, companies that are not required to publish non-financial statements, like SMEs, may decide to publish information on their website regarding their alignment with the Taxonomy Regulation. The taxonomy is the EU’s antidote to greenwashing. Since it will have the force of law and since no other legal frameworks are being developed to compete with it, the EU framework will become the de facto global ESG (gold) standard. London, England The report is supplemented by a technical annexcontaining: 1. The Taxonomy Regulation also introduces new disclosures for corporates subject to the NFRD. Martindale also explained that low taxonomy alignment of a green portfolio does not necessarily mean that a case of greenwashing, according to EU standards, exists. These measures form part of a broader suite of ESG initiatives designed to channel funding to genuinely sustainable rather than greenwashed investments, thereby facilitating compliance with Paris Agreement climate targets and the EU’s commitment to adopt the United Nations (UNs) Sustainable Development Goals as set out in the UN’s 2030 Agenda for Sustainable Development. He has been published extensively in numerous leading law journals with recent articles on shadow banking and the MiFIR transparency regime published in the Journal of International Banking Law and Regulation in 2018 and 2019 respectively. Specifically, Article 18 defines these safeguards as “procedures” that must be implemented by the entity under consideration and which must align with the following international rule sets: In terms of the final bullet, particular emphasis is placed on compliance with the International Labour Organization Declaration's Eight Fundamental Conventions, as set out therein. The logic behind this claim is that the profusion of overlapping voluntary standards has produced a fragmented landscape that inhibits meaningful comparison between investments, thereby discouraging additional sustainable investments. However, as discussed further below, Article 8 of the Taxonomy bridges this gap to a degree. And for the first time, criteria for climate adaptation have been included, covering 70 economic activities, relying on a risk assessment and a plan to address the risks. However, SEC Chair Clayton dismissed the recommendations, arguing that conflation of ESG factors led to an analysis that was insufficiently precise to meaningfully inform investment decisions. An EU Taxonomy is indispensable in making the EU climate targets implementable in practice. Mr. Barrie Ingman is a member of FactSet’s Regulatory Solutions Group. In short, these bodies signaled that they saw the existential threat to their operations posed by the Taxonomy Regulation and were determined to meet it head on. With the first legal, pan-regional framework, the EU will have first-mover advantage and may potentially obtain important network effects that could serve as barriers to entry to the “ESG standards business” in the future. Learn how your comment data is processed. Officially called “Regulation (EU) 2020/852 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088,” nowhere is the term “taxonomy” used. FactSet UK Limited The  tricky relationship between these two principles has not been lost on the European Supervisory Authorities, who, in their April 23, 2020, Joint Committee Consultation Paper on SFDR delegated legislation, discuss the consequences of having these two similar yet separate principles intersecting, together with a litany of other discontinuities and difficulties that arise between the Taxonomy and the SFDR texts. It is a classification system that enables categorization of economic activities/sectors that play key roles in climate change mitigation and adaptation. This is not the only quirk of Article 18 either, which is also notable for requiring the entity under evaluation to comply with the “do no significant harm” (DNSH) principle in Article 2(17) of the SFDR, which in itself is uncontentious, but does draw attention to the “link” (or lack thereof) between the SFDR DNSH principle in Article 2(17) of the SFDR and the similar principle in Article 17 of the Taxonomy Regulation, which applies to the Article 9 Environmental Objectives. He spent the following 15 years working for several of the world’s leading investment banks across Europe and in the U.S before joining FactSet. In terms of the latter, the SFDR distinguishes between genuinely “sustainable investments” (Article 9 of the SFDR) and investments that merely promote the ESG characteristics of an investment (Article 8 of the SFDR). Hong Kong ESG Considerations in the Insurance Space. “Do No Significant Harm” criteria have also been added for climate change mitigation. It contains recommendations relating to the overarching design of the Taxonomy, as well as guidance on how companies and financial institutions can make disclosures using the taxonomy. He has won numerous academic and professional awards including most recently the 2018 Lombard Prize for best post-graduate thesis on finance in the UK, presented by the Worshipful Company of International Bankers. The firm needs to feed the analysis into the SFDR disclosures by way of Articles 5 and 6 of the Taxonomy Regulation, which is the principal mechanism through which the regulation makes its presence felt in the world: In many respects, the Taxonomy can be regarded as a very elaborate set of marketing rules. The most pressing ESG rules for investment firms, however, are those set out in the following three interlinked ESG texts: In summary, the Non-Financial Reporting Directive (NFRD) requires large EU “public interest” corporates (including many financial services firms) to publish data on the impact their activities have on ESG factors. Specifically, Article 8 requires entities subject to the NFRD to disclose in their non-financial statements “information on how and to what extent their activities are associated with environmentally sustainable economic activities under Articles 3 and 9 of the [Taxonomy Regulation]” including: The European Commission is required to adopt a Delegated Act by June 1, 2021, specifying the content and presentation of the information to be disclosed and the methodology used, taking into account the specificities of both financial and non-financial undertakings and the technical screening criteria established under the Taxonomy Regulation. 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