Sustainable finance: latest developments and ABBL's scope of action

The long-awaited delegated act (DA) on climate change was published in the Official Journal of the European Union on 9 December. It specifies the conditions (technical review criteria) for economic sectors and activities to contribute significantly to climate change mitigation or adaptation under the EU Taxonomy Regulation. The act applies from 1 January 2022.

In the meantime, the Article 8 Delegated Act has also been published, which sets out the steps to be taken by companies, both financial and non-financial, to disclose their exposure to economic activities eligible for the Taxonomy (and then the Taxonomy-alignment in a second phase). These measures will also apply from 1 January 2022.

In parallel to these delegated acts, the European Commission (EC) has published:

• non-binding implementation guidance on the content of the mandatory disclosure.
• a classification mapping tool (EU Compass), to support the practical application of the above disclosure obligations.

This set of provisions and guidance represents a key step in the EU's sustainable finance agenda, as it embodies the application of the EU Taxonomy within the overall regulatory framework designed to achieve the EU's climate and environmental objectives.

While nuclear power and gas have been the main points of contention for months, the EC has announced that it will submit a proposal by the end of January for rules to determine whether natural gas and nuclear power projects can be considered sustainable under the EU Taxonomy.

In a joint statement last November with the ministers of Germany, Austria, Portugal and Denmark, Luxembourg's Minister for the Environment, Climate and Sustainable Development Carole Dieschbourg made it clear that, for Luxembourg, nuclear energy cannot be included in the European Taxonomy.

As the EU Taxonomy and its practical application to the banking sector is of utmost importance to our members, the ABBL launched last year a dedicated working group, where banks debate and defend their positions on the European Commission's proposed delegated acts on the EU Taxonomy and related labels. These include the proposed European standard on green bonds, which requires the full alignment of the products raised by these labelled bonds with the EU Taxonomy, and Article 8 DA, which contains detailed provisions on the content and methodology of the Taxonomy-eligibility disclosure. The alignment of banks' exposure is also a priority for the working group.

While small and medium-sized enterprises (SMEs) will remain exempt from the new European Taxonomy disclosure rules from 2022, the ABBL is actively working with its members and the European Banking Federation to support the European Financial Reporting Advisory Group (EFRAG) in defining European sustainability reporting standards for SMEs, as part of the current proposal for a Directive on Corporate Sustainability Reporting (CSRD).

Finally, the proposed timetable for the implementation of the CSRD's sustainability disclosure obligations remains essential to ensure the sequencing of all transparency obligations applicable to the banking sector and the financial industry as a whole.

Related documents (reserved for members):

• FAQ on EU Taxonomy eligibility reporting
• Non-binding implementation guidance
• Classification mapping system