technical expert group on sustainable finance sustainable ... · tables for economic classification...
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Technical Expert Group on Sustainable Finance
Sustainable Taxonomy
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Urgency of environmental challenges
Source:Trajectories of the Earth System in the Anthropocene, Steffen et al. http://www.pnas.org/content/115/33/8252
Source:Planetary boundaries, Stockholm Resilience Centre
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Six environmental objectives
Climate change mitigation Climate change adaptation
sustainable and protection of
water and musearine resources;
pollution prevention and control;protection and restoration of
biodiversity and ecosystems.
transition to a circular economy
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Six environmental objectives – the goals
• Net zero by 2050• 50% to 55% reductions
by 2030
• Build capacity• Increase resilience
Climate change mitigation Climate change adaptation
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Climate change mitigation - opportunities for finance
At least 32% share of
renewables in final
energy consumption
At least 32.5% energy
savings compared with
business-as-usual
Minimum 50%-55% cut
in GHG emissions
compared to 1990
Yearly investment gap€ 175 to 290 billion.
Public money
Private money
2030 targets in line with UN 2030 Agenda, SDGs, Paris Agreement
2050 target of net zero emissions
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Climate ‘Transition’ must have a destination
MtC
O2
eq
MtC
O2
eq
Non-CO2 other
Non-CO2 Agriculture
Residential
Tertiary
Transport
Industry
Power
Carbon Removal Technologies
LULUCF
Net emissions
Different zero GHG pathways lead to different levels of remaining emissions and
absorption of GHG emissions
Source: 2050 long term strategy, https://ec.europa.eu/clima/policies/strategies/2050_en
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Climate ‘Transition’ – TEG response
• Clarity on the environmental goal
• Transition activities and criteria that reduce over time
• Capex and op-ex count
• Improvement measures count
• But not every activity is sustainable (or ‘green’)
• Avoid lock-in
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A Taxonomy framework fit for purpose
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TEG Reports: March 2020
Summary Report▪ Key concepts & important design decisions▪ Detailed guidance for investors and companies▪ Commentary on future development
Technical Annex▪ Full methodologies▪ Detailed criteria with detailed rationale▪ Mitigation + Adaptation + DNSH
Taxonomy spreadsheet▪ All criteria in summary form▪ Tables for economic classification systems
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What has TEG changed since June 2019
1. Received your feedback• Updated 70 mitigation activities
2. Created 68 adaptation activities• Including DNSH to mitigation criteria
3. Guidance for companies and financial participants
4. Learning on international harmonisation
5. Learning on future taxonomy
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What is in the Taxonomy now?Mitigation Adaptation
8
9
25
12
10
2
4
Insurance services
Engineering services
8
9
25
12
10
2
1
1
-
-
-
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Expanded guidance for users
How to apply the Taxonomy to an equity portfolioCompany A Company B Company C
My equity fund is 10.6% taxonomy-aligned
20% weight
15%
50% weight
8%
30% weight
12%
Company
activities
Company
activities
Company
activities
% Taxonomy-aligned
PortfolioTaxonomy-alignment
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Who must do what by when?
Adoption DA: Technical
screening criteria for cc
mitigation and cc adaptation
Adoption DA: Specifying
disclosure obligations for
financial and non-financial
companies
Adoption DA: Technical
screening criteria for the other
environmental objectives
Financial
market
Participants
31/12/2020 31/12/202201/06/2021 31/12/2021
Disclosures for activities
related to cc mitigation and
adaptation (covering the
financial year 2021, publication in
the course of 2022)
Disclosures in relation to cc
mitigation and adaptation in
periodic reports, pre-contractual
disclosures and on websites
Disclosures in relation to all
environmental objectives in
periodic reports, pre-contractual
disclosures and on websites
Disclosures for activities
related to all environmental
objectives (covering the
financial year 2022, publication in
the course of 2023)
Companies
under Art.
19a or 29a
of the
NFRD
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Timeline for future technical work
Submit final
recommendations
Platform on
Sustainable
Finance
End of 2020
Sept 2020
TEG mandate
ends
Platform
operational
Technical
Expert
Group
May 2020
Nominations for Platform
opens
March 2020
Throughout 2021
Criteria for environmental o
objectives 3 – 6 developed
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Transition from environmentally harmful performance
SC threshold
Very low CO2e intensity Very high
DNSH thresholdZero emissions
Substantially
contributing
and can be
called
sustainable
Significantly
harmful
or so-called
“brown”
Both SC and DNSH thresholds reduce towards zero by 2050
Not sustainable but not
significantly harmful
(for now)
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A basis for international harmonisation
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Basis for international harmonisation
1. Clear environmental objectives• e.g. Target year and emissions budget or target
2. A list of economic activities
3. Performance metrics
4. Performance thresholds
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Panel discussion – What’s new?
Nancy Saich, Chief Climate Change Expert, European Investment Bank
Sandrine Dixson-Decleve, Advisory Board, Climate-Kic and Co-president, The Club of Rome
Sean Kidney, CEO and Co-founder, Climate Bonds Initiative
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Adaptation activities
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Responding to technical feedback – distribution
2975
223
145
577
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Responding to technical feedback
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Proposed criteria
AgricultureMaintaining carbon;Improving carbon;Best practice farming
ManufacturingLow carbon components;Aluminium;Steel;Concrete;Plastics
Water & waste management Energy efficiency;Adaptation
TransportZero tailpipe & very low emissions: electric; hydrogen
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Proposed criteria
ForestryMaintaining carbon
Improving carbon
BuildingsTop 15%, or 30% improvementsSupply chain / SMEs
Electricity: 100gms Coe/KWhSolar, wind, geothermal, hydro
Gas only if with CCS enabled
Storage, transmission