By Christopher Walker
On 20 November 2020 the European Commission published the draft Commission Delegated Regulation (“CDR”) supplementing Regulation 2020/852 (the “Taxonomy Regulation”).
The Taxonomy Regulation is focused on the environmental side of “ESG” and aims to provide a common framework designating both the activities and financial products which can be considered environmentally sustainable.
As mandated by the Taxonomy Regulation, the draft CDR’s purpose includes determining screening criteria for the conditions under which economic activities meets the relevant threshold for contributing substantially to climate change mitigation or climate change adaptation. In respect of each environmental objective stated in Article 9 the Taxonomy Regulation, the draft CDR further establishes screening criteria for determining whether that economic activity causes “no significant harm” to one or more of those environmental objectives (i.e. the do no significant harm principle):
The deadline for responses on the draft CDR is 18 December 2020.
“The EU Taxonomy Regulation is important. A sound classification system provides investors with valuable information for their investment decisions. The taxonomy was designed with green bonds in mind. Its application to other financial products may not be as straightforward and the overall design might need to be adjusted. Moreover, the system is indeed very complex.” – Yves Merch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB”