I am a member of the European Union Technical Expert Group (TEG) on Sustainable Finance. This Group, set up in July 2018 by the European Commission, has 35 members i.e. investors, banks, NGOs, Supranational, Corporates, Associations, technical experts. This Group worked on four key actions outlined in the Commission’s Action Plan on financing sustainable growth and to meet Paris targets. To make the EU climate-neutral by 2050, Europe needs between 175 to 290 billion Euro in additional yearly investment in the next decade.
1- Action 1 of the Commission’s Action Plan on financing sustainable growth called for the establishment of an EU classification system for sustainable activities or “Taxonomy”. The EU taxonomy is a classification tool to help investors and companies identify environmentally friendly economic activities. It can help to grow the clean economy of the future and substantially improve the environmental performance of industries we have today. In June 2019, the Technical Expert Group on Sustainable economic activities published the first classification guidance. Within the framework of the proposed Taxonomy regulation, the TEG has developed recommendations for technical screening criteria that can make a substantial contribution to climate change mitigation or adaptation, while avoiding significant harm to the four other environmental objectives : sustainable use and protection of water and marine resources, transition to a circular economy, waste prevention and recycling , pollution prevention control and protection of healthy ecosystems. The next steps are to seek additional feedback on criteria that have not yet been subject to public consultation (a call for feedback has been launched early July) and to develop further guidance on implementation and use of the Taxonomy.
2- Action 2 of the Commission’s Action Plan on financing sustainable growth called for the creation of standards and labels for green financial products. The TEG proposes that the Commission creates a voluntary, non-legislative EU Green bond standards (EU GBS) to enhance the effectiveness, transparency, comparability and credibility of the Green Bond market and to encourage the market participants to issue and invest in EU Green bonds.
The proposed core components of the EU Green Bond Standard are
-Alignment with Taxonomy
-Publication of a Green Bond Framework
-Mandatory reporting on use of proceeds-Mandatory verification of the Green bond framework and the final allocation by an external reviewer.
In addition, the TEG has proposed six additional preliminary recommendation suggesting how the EC, EU and Member State Government and market participants can support the uptake of the EU GBS through both demand and supply-side measures.
The two other actions of the TEG are:
3- New guidelines on reporting climate-related information and on sustainability related Disclosure. These guidelines are consistent with the Non-Financial Reporting Directive and supplement to the general guidelines on non-financial reporting published in 2017.
4- Climate benchmarks and benchmarks’ ESG disclosures. Two new categories of climate benchmarks to orient the choice of investors who wish to adopt a climate-conscious investment strategy. Political agreement reached by European Parliament and Council in February 2019. The TEG published an interim report on climate benchmarks and benchmark’s environmental, social and governance (ESG) disclosures and launched call for feedback in June 2019. As a member of the TEG, I have been working more specifically on the Green Bond Standards. Should it be any need for further information on the above topics, please do not hesitate to contact me, I would be happy to help and support.
Michel Pinto (H.78)