On 18 June, TEG on Sustainable Finance delivered a pack of reports on sustainable finance. TEG mandate was extended till end of 2019 to continue working on taxonomy and benchmarks, but also assist the Commission with the EU Green Bond Standard and the ways it can be taken forward.
Further to that, on 24 June the Commission organised a stakeholders’ dialogue that attracted an impressive number of stakeholders to discuss with the TEG members recently issued reports.
Taxonomy
The taxonomy (see here) is supposed to help investors and companies make informed investment decisions on environmentally friendly activities. The report now focuses on the activities that make a substantial contribution to climate change mitigation and adaptation and it will be developed gradually. It is accompanied by a user guide which provides an overview of what taxonomy is and how to use it in practice. Stakeholders will have an opportunity to provide feedback on the report starting early July.
EU Green Bond Standard
TEG issued its final recommendations to the Commission on the establishment of a voluntary EU Green Bond Standard. There is strong focus on reporting requirements and verification. It is recommended to establish an accreditation regime for external verifiers. The TEG will further work on the suggested interim system for approved verifiers before the accreditation regime is in place.
Benchmarks
TEG proposes minimum standards for methodologies of the two newly introduced benchmarks: EU Climate Agreement and Paris-Aligned which are supposed to address the risk of greenwashing.
Stakeholders are invited to provide their feedback until 2 August. Read more
On 26 June, Finland published its Council presidency programme for the next six months ‘Sustainable Europe – Sustainable Future’.
Sustainability is placed at the core of all EU action. Also, the intention is to raise the EU profile as a global leader in climate action. Read more
On 18 June, the European Commission launched guidelines to help companies improve their climate-related reporting. These supplement guidelines integrate the TCFD recommendations and provide information on how to report the impact of business activities on the environment and vice-versa – the impact of climate change on the business. Also, the guidelines take into account the upcoming taxonomy. Read more
On 20 June, EU leaders did not agree on the date for achieving a climate neutrality in EU. MSs dependent on coal (Poland, Hungary, Czech Republic and Estonia) were not convinced they would receive sufficient assistance in this transition, the main concern being the costs of the transition to climate neutral economy and the potential impact of their competitiveness. Read more
On 24 June, the European Securities and Markets Authority published a consultation seeking to gather evidence on potential short-term pressure on corporations coming from the financial sector as part of the Action Plan on Sustainable Finance. The aim is to identify areas in which existing rules might contribute to mitigating undue short-term pressure but also the areas where the rules add to it. ESMA seeks input on six areas: investment strategy and horizon; ESG disclosures and their contribution to the long-term strategies; the role of fair value in better investment decision-making; institutional investors’ engagement; renumeration of fund managers and corporate executives; use of credit default swaps. Read more
On 3 June, the European Insurance and Occupational Pensions Authority launched a consultation on a draft opinion on sustainability within Solvency II. This is part of EIOPA’s strategic priorities in Sustainable Finance and also a follow up to the Commission’s call for opinion (which was part of the Action Plan). The opinion addresses the valuation of assets and liabilities, assesses current investment and underwriting practices and seeks to contribute to the integration of sustainability risks in market risks and natural catastrophe underwriting risks for the solvency capital requirements for standard formula and internal model users.
On 12 June, the European Court of Auditors launched a rapid case review which looks into the SDGs reporting practices by the individual EU institutions and agencies. The review reveals that the European Investment Bank and the European Union Intellectual Property Office publish sustainability reports. Sustainability reporting is currently not integrated into the Commission’s performance framework. Read more
On 5 June, the International Organisation of Securities Commissions issued a final report on the sustainable finance in the emerging markets. The report provides an overview of regulatory initiatives in emerging markets, market trends, but also ten recommendations, to mention a few: integration of the ESG-specific issues in overall risk assessment and governance, ESG-specific disclosures, reporting and data quality, etc. Read more
TCFD published its second status report on the uptake of the recommendations for climate-related financial disclosures.
Key takeaways: disclosures are increasing, but they are still not sufficient for investors; more clarity is needed on potential financial impact of climate-related on companies; companies do not disclose information on the resilience of their strategies when using scenarios; mainstreaming climate-related issues requires the involvement of multiple functions. Read moreThis curated content was brought to you by Vita Ramanauskaité, Accountancy Europe senior policy advisor since 2015. You can send her tips by email, follow her on Twitter and connect with her on LinkedIn.
