Did you miss last week the 2-days of webinars on the EU Taxonomy for Green Finance organized by the European Commission the 24 and 26 of February ? Don’t let it bother you: we prepared 14 key takeaways!
Webinars on EU Taxonomy: Agenda
With the 800 printed pages of EU taxonomy, 1 kg. of pop-corn, and 2 litres of organic coffee to help digest the whole, we were quite ready to confront the 9 hours of 1.5 to 2 hours-long presentations of series of webinars on EU Taxonomy, aiming at discussing future developments with the Platform on Sustainable Finance—and whose program was the following:
Wednesday 24 Feb.
- Enabling transition finance
- Developing potential taxonomies beyond green activities
- Data and corporate reporting
Friday 26 Feb.
- The process of developing taxonomy criteria for the remaining four environmental objectives
- Social taxonomy – how might it look
14 key takeaways on the EU Taxonomy webinars
We organized our takeaways by keywords in the following table, each keyword being a topic discussed during the webinars. Each takeaway provides a brief overview of both the EU experts’ point of view and of our opinion on the topic.
Experts’ point of view and our opinion
|1. Tool||What is the taxonomy, and what it is not?||The taxonomy is a dictionary that allows to clarify the activities that are good for the climate change transition.|
Our opinion: absolutely necessary — but it must be exhaustive, precise and comprehensible
|2. Benchmark||What does the taxonomy allow to compare?||The primary objective is to compare between them companies, and also funds.|
Our opinion: many aspects require further clarification, in the Technical Annex, especially regarding the metrics, thresholds, definitions…
|3. Significant Harm||The definition of this principle if not clear enough.||Agreed—The Platform recognized that this aspect needs additional work to detail the principle. The definition can vary depending on the nature of the activity.|
Our opinion: a clear definition will certainly be key, associated with thresholds related to the type of impact—and that is precisely how we handled this in our own proprietary ESG Impact rating methodology.
|4. Transparency||Is it the best tool to fight greenwashing?||One of the main goals of the taxonomy is precisely to fight greenwashing.|
Our opinion: a mandatory tool in a strongly growing market, where greenwashing thrives….
|5. Green||Why a “green” taxonomy, and not a “sustainable” one?||Climate Change is a priority, and it is complicated enough to reach a consensus on it with all stakeholders involved.|
Our opinion: we totally understand and agree, let’s start where it is easier, and the future aspects of the taxonomy should allow to truly measure the sustainability of a company.
|6. Time problem||But will the taxonomy really be applicable? And when?||The taxonomy will become applicable in less than a year, but it doesn’t mean that it will be “perfect” at this date.|
Our opinion: sure, not everything needs to be perfect to start to truly act. But to be efficient, 3rd-parties verification will be required.
The social and environmental situations are urgent, we must now act without further delay.
|7. Taxonomy enlargement||Should the taxonomy be extended to other sectors?||This is a highly political question, that impeded the publication of the final version of the Technical Annex.|
Our opinion: the most important part of the work on the taxonomy was probably the choices having been made—and it takes courage for this kind of choices. Yes, some activities are not, and cannot become sustainable, ever. It implies that concerned companies will have to pivot their activity toward a sustainable one.
|8. Reporting||What should be the format of the reporting?||Reporting is essential, and it represents an opportunity to rethink a company’s strategy. The taxonomy reporting could substitute for the—generally—fat and barely digestible sustainable reports.|
Our opinion: it is indeed necessary to work on this aspect, another key, in order to make everything accessible to the general public—and fight against greenwashing.
|9. Data||How to solve the problem with the data?|| To date, much information required by the taxonomy is missing on the data providers’ service offer. A project of European data platform is under scrutiny. Data must be harmonized.|
Our opinion: great project idea, this European data platform (we have been waiting for something like this for decades…), but the data is not all… complementary information must be provided in order to be able to analyze the data, e.g. impact thresholds need to be defined, from adverse to positive, for a company or fund—and to be able, also, to track the progress.
|10. Improvement path||Is taxonomy applicable to all?||Today, the taxonomy can induce difficulties for certain companies, especially SMEs and SMIs, where CAPEX and OPEX tracking and reporting is not the rule.|
Our opinion: this is an important problem, since the objective of the taxonomy is to become a foundation for the green deal, and the funding and lending—for the years to come.
|11. Coverage||How does taxonomy apply to non- European companies?||Taxonomy is applicable to EU companies|
Our opinion: Yes, but obviously we should go further for companies that sell in Europe, and especially for the funds—and copy, e.g., the approach of the NFRD. We must not forget that there are other countries that are also working on their own taxonomy.
|12. Missing issuers||The taxonomy applies to companies, but how to handle the other kind of issuers of a fund? (countries, territories…)||The taxonomy focused on companies, to date.|
Our opinion: an important point—to date, a large part of the investments concerns the Govies, the Green Bonds market is booking, and the ESG risk of a company’s country is essential to measure, especially for an investment fund. An that’s also why, at IMPACTIN, we developped several datasets such as our Countries ESG Impact Rating dataset or our Territories Climate Change and Physical Risk Rating
|13. Transition||Will there be a transition period in the application of taxonomy?||Yes, a transition period will allow things to be put in place.|
Our opinion: We agree, not everything needs to be perfect to start to truly act. But to be efficient, 3rd-parties verification will be required. The social and environmental situations are urgent, we must now act without further delay.
|14. Priorities||What are the priorities?||Today, the priority is to reach a consensus on the final text of the Technical Annex and recommendations, which will be ready in the second half of the year|
Our opinion: no doubt there is still a lot of things to do, a great many things—and priorities must thus to be clarified and communicated clearly, especially due to the tight timing.