ICMA makes proposals to address usability concerns over the EU Taxonomy
14 February 2022 ICMA has published a paper which identifies challenges for the financial and corporate sector in providing information on the alignment of their activities with the EU Taxonomy as required by existing and proposed future regulatory reporting. The paper makes five key recommendations EU co-legislators and regulators to address these usability concerns. The objective is to ensure the availability of Taxonomy information to help guide market participants and policy makers alike in their decisions relating to sustainable strategy and policy making.
While the Taxonomy has been widely discussed recently in terms of how it defines sustainability and its scope, the new paper Ensuring the usability of the EU Taxonomy identifies practical concerns supported by research over the usability of the Taxonomy for the financial and corporate sector, not least the difficulty in sourcing or estimating the required detailed information on alignment, or the reliance on EU legislation and criteria in an international market. The paper aims to provide solutions drawing on both conceptual and practical solutions to these issues that exist or that are emerging from both regulation and market practice.
Bryan Pascoe, ICMA Chief Executive said: “The EU Taxonomy is an important and ground-breaking project designed to help inform the market and policy makers on their progress towards sustainability. Our analysis and proposals, produced with the input of ICMA members, are a contribution to the ongoing efforts of many parties to ensure that it can fulfil in practice its intended objective.”
The EU Taxonomy aims to define environmentally sustainable activities to fulfil the EU’s objective of steering private and public capital to a sustainable economy. It will be used as the main classification tool to identify and monitor sustainable activities and as a reference for disclosure obligations and official labels for financial products. It is unique in that it is incorporated into EU regulation and legislation, which will require detailed environmental reporting by financial and non-financial firms under the Sustainable Finance Disclosure Regulation and eventually under the proposed of the Corporate Sustainability Reporting Directive and the EU Green Bond Standard.