Stockholm (NordSIP) – EU legislation, not least sustainable finance regulations and delegated acts (DAs), is an ever-evolving structure of business activity in Europe. Most recently, and for the last four weeks, stakeholders have been able to submit their feedback on three legislative proposals from the European Commission (EC) aimed at enhancing the EU Taxonomy.
With the consultation period ending at the start of May, the responses are now in. A very wide range of stakeholders took the opportunity to provide their feedback to the EC on these proposals, including the views of the EU’s Platform for Sustainable Finance, a specialist advisory body to the EC on matters pertaining to sustainable finance, as well as those of international organisations, public authorities and businesses from the Nordics.
The Proposed Amendments
The draft delegated acts published by the EC on April 5th propose amending three existing pieces of EU regulation pertaining to the EU Taxonomy.
The first document was a draft delegated regulation in two parts. The first part “supplements” EU Taxonomy (Regulation (EU) 2020/852) and is to be known as the “Taxonomy Environmental Delegated Act”. The second part amends a later “Taxonomy Disclosures Delegated Act” (Delegated Regulation (EU) 2021/2178). The “Taxonomy Disclosures Delegated Act” of 2021 specified the content and presentation of information to be disclosed by companies involved with these environmentally sustainable economic activities.
The “Taxonomy Environmental Delegated Act” seeks to establish a new set of EU Taxonomy criteria for economic activities “making a substantial contribution to one, or more, of the following environmental objectives”: “sustainable use and protection of water and marine resources”, “transition to a circular economy”, “pollution prevention“ and control and protection and restoration of biodiversity and ecosystems”. The draft amendment to the Disclosures Delegated Act would ensure that disclosures are required for the new activities incorporated via the Taxonomy supplement.
The second document published by the EC on that date was a draft delegated regulation amending the “Taxonomy Climate Delegated Act” (Delegated Regulation (EU) 2021/2139), which covers the technical screening criteria activities which can make a substantial contribution to climate change mitigation and adaptation. The new amendments seek to provide additional technical screening criteria for determining the conditions under which certain economic activities qualify as contributing substantially to climate change mitigation or climate change adaptation and for determining whether those activities cause no significant harm to any of the other environmental objectives.
Feedback from the Platform and Nordic Public Authorities
The EU’s Platform on Sustainable Finance, a specialist advisory body to the European Commission on matters pertaining to sustainable finance, published its response, which made a series of recommendations aimed at improving the usability and applicability of criteria of specific activities.
The Platform argues that “some criteria are not described with sufficient clarity to allow their standardised application and verification.” Moreover, “some criteria cannot be applied to the full scope of the activity. For some activities, the scope is not clearly defined, or it overlaps, or is broader than recommended. The scope of some activities can be extended without jeopardizing the quality of the criteria, while at the same time increasing the coverage of the Taxonomy. Not all criteria that reflect the same concept and are applied in the criteria of several activities are consistent across these activities.”
Among many other comments, the Platform argues that the Commission should simplify the criteria and urges the EC not to leave at the discretion of a company, economic actor, or the auditor the setting of the criteria or the interpretation of the level of ambition. It also proposes that a distinction should be made between “low-carbon” or transitional” activities.
Commenting on the amendments to the Taxonomy Disclosures Delegated Act, the platform focuses on the “overarching belief that reporting is the means towards an end”, namely “to maximise the effectiveness of the Taxonomy in financing the transition of the real economy to a sustainable economy – carbon neutral, resilient, circular, and environmentally sustainable.”
At least two Nordic public authorities contributed their perspectives on the drafts. The Ministry of Finance of Finland provided extensive comments on several new products which were included in Taxonomy Environmental Delegated Act. It welcomed the addition of river basin management measures and recommended the inclusion of “measures for lakes as a part of the river network”, and it stressed the need to prioritize consumer protection and food safety. It also warned when certain criteria made “the application of the criteria confusing and complicated”. The City of Gothenburg, in the southwest of Sweden, collected opinions from the city’s administrations and companies.
International Organisations
MSCI was generally positive about the proposals. “We welcome the publication of the Delegated Act which provides technical guidance on environmentally sustainable economic activities for the remaining four environmental objectives under the EU Taxonomy. The list of activities in the Delegated Act provides clarity to the market participants seeking to direct capital towards activities aligned with the objectives of the European Green Deal. We welcome the approach proposed by the Commission to identify and prioritise those sectors that will be most critical in helping to achieve a fair green transition, and also supporting greater adoption of the EU taxonomy,” stated Ryan Mensing, Executive Director Government and Regulatory Affairs MSCI ESG Research LLC. The only issue it found was with “certain criteria that may create implementation challenges and could inadvertently limit financing for sustainable activities.”
The Nordic Financial Unions (NFU) provided feedback on Annex II and Annex IV to the Environmental Delegated Act. “While Annex II provides clear and concise targets for recycling of materials, especially for construction and real estate activities, it fails to provide clear targets for the reuse, the repurpose and the refurbishment of exciting composite materials. Which in most cases will have a lower environmental impact than the recycling of material,” said Anna-Delia Papenberg, EU Coordinator at Stockholm-based NFU. “Annex IV shies away from bringing clarity to politically contested areas, such as forestry, land use, fishery and agriculture. By circumventing politically contagious areas, the taxonomy environmental delegated act with respect to biodiversity becomes political by way of omission,” Papenberg added, among other comments.
Nordic Ecolabelling, the Denmark-based competent body for the EU Ecolabel and Nordic Swan Ecolabelling in the Nordic countries, the two officially recognised ISO 14024 Ecolabels. “We see clear synergies between the goal of the Taxonomy and the purpose of officially recognised ISO 14024 Ecolabels, like EU Ecolabel and the Nordic Swan Ecolabel. (…) we welcome the Taxonomy requirements or chapters that directly point out the use of officially recognised ISO14024 Ecolabels as a tool for verifying Taxonomy compliance,” says Karen Dahl Jensen, Product Development Manager at Nordic Ecolabelling. “We suggest aligning the reference to Ecolabels across the Taxonomy chapters and annexes. This would ensure, that the use of officially recognised ISO 14024 Ecolabels is always possible in relevant product groups. It would also simplify the use of Ecolabels as a tool for the producers, and their interest part in the financial sector,” Jensen adds.
Nordic businesses
Responses from Nordic businesses can be organised by industry, including the construction, forestry, air travel, energy, farming and water industries. The first three of these sectors were dominant by volume of contributions.
General business associations from the Nordic region were represented by the Federation of Norwegian Industries, the Confederation of Finnish Industries EK, and the Danish Chamber of Commerce.
Within the construction industry, the Danish Concrete Association, MT Højgaard Holding A/S, Ruukki Construction Oy, the Finnish Association of Construction Product Industries RTT, the Finnish Constructional Steelwork Association, Svensk Betong (Swedish Concrete Federation), and Construction Products Sweden all provided feedback on the proposals.
Feedback from the forestry sector were dominated by Finnish interest. The Finnish Forest Industries Federation, the Federation of the Finnish Woodworking Industries and Stora Enso made their voices heard. Across the border, the Swedish Forest Industries Federation and FAM AB also expressed their views on the legislative proposals.
From the air travel sector, Finnair and the Swedish Aviation Industry Group also provided their feedback on the EC DA drafts. Finnish Energy, the Finnish Biocycle and Biogas Association, Sekab Biofuels & Chemicals and Swedenergy represented the views of the energy sector, while Vattenfall and Svenskt Vatten spoke for the water management sector. Finally, the Danish Agriculture and Food Council provided the farming perspective.
