As part of a comprehensive and ambitious package of measures, the European Commission has now adopted two new environmental objectives:
The EU’s aim is to increase the flow of investment money towards sustainable activities across the European Union. These measures will serve the overall goal of achieving a climate-neutral European economy by 2050. Today’s delegated act is setting the course for establishing the EU as a global leader in standards for sustainable finance.
The new package introduced by the European Commission consists of:
In order to reach the EU’s goal of climate neutrality by 2050, companies need a comprehensive sustainability framework to change their business models accordingly. To ensure the transition in finance and prevent greenwashing, all elements of today's package will enhance the reliability and comparability of sustainability information.
The EU Taxonomy is created to serve as a transparency tool for companies and investors. It creates a common language that investors can use when investing in projects and economic activities that have a substantial positive impact on the climate and the environment. It will also introduce disclosure obligations on companies and financial market participants.
The Climate Delegated Act would cover the economic activities of roughly 40% of all listed companies, in sectors that are responsible for almost 80% of direct greenhouse gas emissions in Europe. It includes sectors such as energy, forestry, manufacturing, transport and buildings.
The EU Taxonomy Delegated Act should be seen as a living document that will evolve further over time as new developments and technological progress occur. The criteria will be reviewed regularly. This will ensure that new sectors and activities, including transitional and other enabling activities, can be added to the scope over time.
Today’s introduced changes revise and strengthen the existing rules of the Non-Financial Reporting Directive (NFRD). The aim is to create a set of rules that will bring sustainability reporting on par with financial reporting.
It will extend the EU's sustainability reporting requirements to all large companies and all listed companies. This means that nearly 50,000 companies in the EU will now need to follow detailed EU sustainability reporting standards. Initially, 11,000 companies were subject to the existing requirements. The European Commission proposes the development of standards for large companies and separate, proportionate standards for SMEs. Non-listed SMEs can use these voluntarily.
Overall, the proposal aims to ensure that companies report reliable and comparable sustainability information needed by investors and other stakeholders. It will ensure a consistent flow of sustainability information through the financial system. Companies will have to report on how sustainability issues, such as climate change, affects their business and the impact of their activities on people and the environment.
The proposal will also simplify the reporting process for companies. Many businesses are currently under pressure to use a wide variety of different sustainability reporting standards and frameworks. The proposed EU sustainability reporting standards can now serve as a “one-stop-shop” that provides companies with a single solution and meets the information needs of investors and other stakeholders.
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