The European Commission has published additional guidance on how the finance sector should use the EU Taxonomy.
In a document published today, the Commission and its advisors have tried to address more than 300 questions received from stakeholders about how investors and lenders should approach its climate framework.
Starting in January, the financial sector will have to disclose how their portfolios stack up against the activities and requirements laid out in the green taxonomy.
So far, the Commission has focused on providing non-financial companies with additional guidance on the regulation, but in this instance, it has answered a number of Frequently Asked Questions (FAQ) specifically related to finance.
“Through this Notice, the Commission intends to facilitate the compliance of stakeholders with the regulatory requirements in a cost-effective way and to ensure the usability and comparability of the reported information for scaling up sustainable finance,” it said in the 57-page document.
The FAQs cover everything from the scope of the disclosure requirements to the way that financial institutions should approach both turnover and capital expenditure calculations.
ESG Ratings
Elsewhere, the European Council has reached a position on regulation that will govern ESG ratings providers.
Official political negotiations will kick off on the proposed regulation in January between the European Parliament, Council and Commission. Currently, the plan is for the legislation to require ratings providers to be authorised and supervised by ESMA, and to be more transparent about their methodologies and potential conflicts of interest.
Yesterday, the Council agreed that it would push for “a lighter, temporary and optional registration regime of three years for existing small ESG rating providers and new small markets entrants”.
Qualifying providers who opt in to this regime wouldn’t have to pay fees to ESMA, and would have pared back requirements.
The Council also wants to water down the requirement for ESG ratings’ houses to separate their business activities, saying there should be provisions to allow them “not to have a separate legal entity for certain activities, provided that there is a clear distinction between activities and that they put in place measures to avoid conflicts of interests”.
“This derogation would not be applicable to consulting or audit activities when they are provided to rated entities,” the Council added.
European Parliament agreed its position on the file earlier this month.
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