The European Union (EU) has set out its plans to make it easier to apply the ‘taxonomy’ for classifying sustainable activities and investments in order to inform green investors, led by the bloc’s financial services chief Mairead McGuinness.
The EU is introducing measures to help the economy reach net zero emissions targets by 2050, through disclosures from asset managers and companies, underpinned by a sustainability taxonomy.
The EU Taxonomy is a classification system established to clarify which investments are environmentally sustainable. The aim is to prevent greenwashing and to help investors make greener choices.
However, the taxonomy remains a “work in progress” and McGuinness said she was aware of company concerns over its “usability” and trustworthiness as rules need to be applied next year. “We will aim to publish over 200 frequently asked questions to help businesses with reporting obligations under the taxonomy,” she told the European Parliament.
“The goal for me is to make the taxonomy work effectively. We intend to look at this issue of usability very carefully. We may need to take a much broader look at this regulation,” she said, adding this would include a public consultation early in 2023, looking at the role of the rules in mitigating greenwashing or over-inflated sustainability claims.
As well as the taxonomy it was also announced that the technical details for implementing company sustainability disclosures in annual reports, known as CSRD, will be brought forward next year as well.
“We have done a lot and now we need to make sure that collectively it works,” McGuinness said.
A phase-in rather than big bang approach is likely to be the best way to add remaining “taxo4” elements to the taxonomy – water, circular economy, pollution prevention and protection of biodiversity – McGuinness said.
It would start with sectors where there is already consensus, she said.
McGuinness is also considering a proposal to inject more transparency and avoid conflicts of interest at compilers of ratings on company environmental, social and governance credentials, she said.
