Economic Undertakings

Update of the EU taxonomy: the review period for delegated acts with the climate TSC is postponed to December

Delegated act with TSC on climate change mitigation and adaptation

At 28 September 2021, the Council of the EU requested a two-month extension of the review period for the delegated act (“AD“) which contains the technical selection criteria (“TSC”) For adaptation and mitigation of climate change within the framework of EU taxonomy regulation (the “Climate Taxonomy DA“). See our previous blog post for more details on the DA.

The Climate Action Plan on Taxonomy was formally adopted by the European Commission in June and is currently under consideration by the European Parliament and the Council. The review period was initially four months and was to last until October 8, 2021. However, the Board has now requested an extension of the two-month review period for December 8, 2021.

It was expected that the climate TSA disclosure obligations under the taxonomy regulation would apply from January 1, 2022, but the extension of the review period now calls into question compliance with this deadline.

If no objections are raised during the review period ending on December 8, the DA on Climate Taxonomy will be published in the Official Journal of the EU and will enter into force on the following day twentieth day. However, if there are objections from Member States (or the European Parliament) and approval is not granted by December 8, the implementation of the DA climate taxonomy by the deadline of January 1 will be difficult. The European Commission has refused to take immediate decisions on postponing or postponing the application of the rules, but said it will have to continue monitoring the situation.

If the European Parliament or the Council objects to the DA taxonomy, it will not come into force and the European Commission will have to revise the legislation. They cannot edit the AD, so they must approve or reject it in its entirety. This will have implications for the Level 1 rules already in place and could be a blow to the EU’s ambitions to be a world leader in sustainable finance.

Why the delay? Nuclear and natural gas

In April, the European Commission announced that nuclear and natural gas power generation would not be included in the DA climate taxonomy. Instead, a complementary delegated act will cover (i) nuclear energy (subject to a review of the ‘do no harm’ aspects of nuclear energy by independent experts), and (ii) natural gas and related technologies as transitional activities (insofar as they fall within the limits of Article 10 (2) of the Taxonomy Regulation). The European Commission has also undertaken to consider specific legislation to support the financing of certain economic activities in the gas sector which contribute to reducing greenhouse gas emissions but which do not fall within the scope of the Regulation. EU taxonomy. The additional delegated act is expected “as soon as possible after the end of the specific review process scheduled for summer 2021”.

A number of EU Member States have indicated that they are unwilling to give the green light to the DA on climate taxonomy until they consider the European Commission’s proposals for activities. remaining economic.

To give you a taste of what else is going on, on September 27, the European Parliament rejected three separate resolutions from MEPs that attempted to block the DA of climate taxonomy. The plenary of the European Parliament is now expected to adopt a swift non-objection to AD (i.e. give the green light) at its next session on October 4-7.

The 4 other environmental objectives of the TSC

The DA climate taxonomy covers two of the six environmental objectives defined in the EU taxonomy.

On August 3, the EU platform for sustainable finance (“PSF”) (Which advises the Commission on Taxonomy) has published for consultation a disorganized with preliminary recommendations on TSC for the four remaining environmental objectives under EU taxonomy, namely water, circular economy, pollution prevention and control, and biodiversity and ecosystems (see our previous blog post).

Following an extension of the consultation period, the PSF’s recommendations should now be presented to the European Commission within the next week. 29 november. These recommendations will be used by the Commission as the basis for a separate delegated act to be adopted in the Spring 2022 and apply from January 1, 2023.

Commission guidance on taxonomy Article 8 DA and disclosures

The delegated act under Article 8 of the EU Taxonomy Regulation (the “Taxonomy Article 8 DA”) Was adopted by the Commission on July 6 and is subject to a review period of 4 months until November 7 (which can be extended by a further 2 months).

Article 8 requires that companies covered by the Directive on non-financial reporting (“NFRD”) To publish information on how and to what extent their activities are associated with economic activities that qualify as“ environmentally sustainable ”under the taxonomy regulation. Article 8 of the DA on taxonomy defines the content, presentation and methodology of the information to be disclosed by financial and non-financial companies subject to the NFRD (see our previous blog post).

With regard to the products referred to in Article 8 and Article 9 of the Sustainable Finance Disclosure Regulation (“”SFDR“), the market still lacks clarity on what is expected regarding disclosures by financial market participants for Articles 5 and 6 of the EU taxonomy.

In response, the Commission plans to publish a Questions and answers before January 2022 with advice on the declaration of taxonomy eligibility and general legal interpretation, covering the legal interpretation of DA Article 8 on taxonomy and implementation guidelines for the year 2022 declaration.

The Commission also plans to complete this Level 3 guidance on the declaration of the alignment of the taxonomy to the European supervisory authorities (“AES“) before January 2023.

Brown and social taxonomies

The main focus of the PSF is now to work on feedback from public consultations on “brown” and social taxonomies (see our previous blog post).

The final PSF recommendations on these taxonomies should be sent to the Commission on 20 October 2021.

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