Council of theEuropean Union
Brussels, 17 December 2019
(OR. en)
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Interinstitutional File:
2018/0178 (COD)

LIMITE
EF 357ECOFIN 1126
CODEC 1750
ENV 995
SUSTDEV 173'I' ITEM NOTE
From:
To:

Presidency
Permanent Representatives Committee

No. Cion doc.:

COM (2018) 353 final

Subject:

Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND
OF THE COUNCIL on the establishment of a framework to facilitatesustainable investment- Approval of the final compromise text

Delegations will find below the final compromise text on the abovementioned Commission proposal.

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LIMITEENREGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the establishment of a framework to facilitate sustainable investment, and amending
Regulation 2019/2088 on sustainability-related disclosures in the financial services sector(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114
thereof,
Having regard to the proposal from the European Commission,
After transmission of the draft legislative act to the national parliaments,
Having regard to the opinion of the European Economic and Social Committee1,
Acting in accordance with the ordinary legislative procedure,
Whereas:(1)

Article 3(3) of the Treaty on European Union (TEU) aims to establish an internal market thatworks for the sustainable development of Europe, based among others on balanced economic growth
and a high level of protection and improvement of the quality of the environment.

1

OJ C 62, 15.2.2019, p. 103.

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(2)On 25 September 2015, the UN General Assembly adopted a new global sustainable

development framework: the 2030 Agenda for Sustainable Development2 having at its core theSustainable Development Goals (SDGs) covering three pillars of sustainability: environmental,social and economic/governance. The Commission's Communication of 22 November 2016 on thenext steps for a sustainable European future3 links the SDGs to the Union policy framework toensure that all Union actions and policy initiatives, within the Union and globally, take the SDGs on
board at the outset. In its conclusions of 20 June 20174 the Council of the European Union confirmed
the commitment of the Union and the Member States to the implementation of the 2030 Agenda in afull, coherent, comprehensive, integrated and effective manner, and in close cooperation withpartners and other stakeholders. On 11 December 2019, the European Commission published its
Communication on the European Green Deal.

(3)

In 2016, the Council concluded on behalf of the Union the Paris Agreement5. Article 2(1)(c)of the Paris Agreement sets the objective of strengthening the response to climate change, among
other means by making finance flows consistent with a pathway towards low greenhouse gas
emissions and climate-resilient development. In this context, the European Council adopted on 12
December 2019 conclusions on climate change. In light of this, this Regulation represents a key
step towards the objective of achieving a climate-neutral EU by 2050.

(4)

Sustainability and the transition to a safe, climate neutral and climate resilient, more resource-

efficient and circular economy is the key in ensuring long-term competitiveness of the Union’s
economy. Sustainability has long been at the heart of the European Union project and the Treaties
give recognition to its social and environmental dimensions.

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3
4
5

Transforming our World: The 2030 Agenda for Sustainable Development (UN 2015) available athttps://sustainabledevelopment.un.org/post2015/transformingourworld.
COM(2016) 739 final.
DEVGEN 139, ONU 83, ENV 624.
Council Decision (EU) 2016/1841 of 5 October 2016 on the conclusion, on behalf of the European Union, of
the Paris Agreement adopted under the United Nations Framework Convention on Climate Change (OJ L 282,
19.10.2016, p. 4).

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(5) In December 2016, the Commission mandated a High-Level Expert Group to develop an
overarching and comprehensive Union strategy on sustainable finance. The report of the High-Level
Expert Group published on 31 January 20186 calls for the creation of a technically robust
classification system at Union level to establish clarity on which activities are ‘green’ or‘sustainable’, starting with climate change mitigation.

(6)

In March 2018, the Commission published its Action Plan 'Financing Sustainable Growth'7

setting up an ambitious and comprehensive strategy on sustainable finance. One of the objectives
set out in the Action Plan is to reorient capital flows towards sustainable investment in order toachieve sustainable and inclusive growth. The establishment of a unified classification system forsustainable activities is the most important and urgent action envisaged by the Action Plan. The
Action Plan recognises that the shift of capital flows towards more sustainable activities has to beunderpinned by a shared, holistic understanding of the environmental sustainability of activities andinvestments. As a first step, clear guidance on activities qualifying as contributing to environmental
objectives, should help inform investors about the investments that fund environmentally
sustainable economic activities. Further guidance on the activities contributing to othersustainability objectives, including social objectives, might be developed at a later stage.

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7

EU High-Level Expert Group on Sustainable Finance Final Report, Financing a Sustainable European
Economy, available at: https://ec.europa.eu/info/sites/info/files/180131-sustainable-finance-finalreport_en.pdf.
COM(2018) 97 final.

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(6a) Given the systemic nature of global environmental challenges, there is a need for a systemic
and forward-looking approach to environmental sustainability, addressing growing negative trends,
such as climate change, the loss of biodiversity, the global overconsumption of resources, theappearance of new threats including hazardous chemicals and their combined effects, nutrition
scarcity, ozone depletion, ocean acidification, fresh water depletion, and land system change.

(7)

Decision No. 1386/2013/EU of the European Parliament and of the Council8 called for an

increase in private sector funding for environmental and climate-related expenditure, notably throughputting in place incentives and methodologies that stimulate companies to measure theenvironmental costs of their business and profits derived from using environmental services.

(8)

Achieving SDGs in the Union requires channelling of capital flows towards sustainable

investments. It is important to fully exploit the potential of the internal market for the achievement of
those goals and to ensure that capital flows channelled towards sustainable investments are notdisrupted in the internal market.

(8a)

The scale of the challenge and the costs associated with inaction or delayed action entails

gradually moving the financial system to support the economy to function on a sustainable basis. To
that end, sustainable finance needs to be brought into the mainstream and consideration needs to bemade of sustainability impact in respect of financial products and services.

8

Decision No. 1386/2013/EU of the European Parliament and of the Council of 20 November 2013 on a
General Union Environment Action Programme to 2020 ‘Living well, within the limits of our planet’ (OJ L
354/171 28.12.2013).

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(9)Offering financial products which pursue environmentally sustainable objectives is aneffective way of channelling private investments into sustainable activities. National requirements
for marketing financial products or corporate bonds as environmentally sustainable investments,
including the requirements set out by Member States and the Union to allow the relevant market
actors to use a national label, aim to enhance investor confidence and awareness of environmental
impact, to create visibility and to address concerns about “greenwashing”. Greenwashing refers to
the practice of gaining an unfair competitive advantage by marketing a financial product asenvironmentally friendly, when in fact it does not meet basic environmental standards. Currently a
few Member States have in place labelling schemes. Those existing schemes build on different
taxonomies classifying environmentally sustainable economic activities. Given the politicalcommitments under the Paris Agreement and at Union level, it is likely that more and more
Member States will establish labelling schemes or other requirements on financial market
participants or issuers in respect of financial products or corporate bonds marketed asenvironmentally sustainable. In doing so, Member States would be using their own nationaltaxonomies for the purposes of determining which investments qualify as sustainable. If suchnational requirements are based on different criteria as to which economic activities qualify asenvironmentally sustainable, investors will be discouraged from investing across borders, due todifficulties in comparing different investment opportunities. In addition, economic operators
wishing to attract investment from across the Union would have to meet different criteria in thevarious Member States in order for their activities to qualify as environmentally sustainable for the
purposes of those different labels. The absence of uniform criteria will thus increase costs andcreate a significant disincentive for economic operators, amounting to an impediment to accesscross-border capital markets for sustainable investments.

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LIMITEENThe criteria for determining whether an economic activity is environmentally sustainable should beharmonised at Union level, in order to remove barriers to the functioning of the internal market withregard to raising funds for sustainable projects, and prevent their future emergence. With suchharmonisation economic operators will find it easier to raise funding for their environmentally
sustainable activities across borders, as their economic activities can be compared against uniform
criteria in order to be selected as underlying assets for environmentally sustainable investments. It
will therefore facilitate attracting investment across borders within the Union.

(10) Moreover, if financial market participants do not provide any explanation to investors for how
the activities they invest in contribute to environmental objectives, or if they use different concepts
in their explanation of what is a ‘environmentally sustainable’ economic activity, investors will find
it disproportionately burdensome to check and compare different financial products. It has beenfound that this discourages investors from investing into environmentally sustainable financial
products. Furthermore, the lack of investor confidence has major detrimental impacts on the market
for sustainable investment. It has further been shown that national rules or market-based initiatives
taken to tackle this issue within national borders will lead to fragmenting the internal market. If
financial market participants disclose how and to what extent the financial products that they offer
are environmentally sustainable actually meet the criteria for environmentally sustainable economic
activities under this Regulation, and they use for such disclosures common criteria across theUnion, this will help investors compare investment opportunities across borders and will incentivise
investee companies to make their business models more sustainable. Additionally, investors will
invest in environmentally sustainable financial products with higher confidence across the Union,
thereby improving the functioning of the internal market.

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(11) To address existing obstacles to the functioning of the internal market and to prevent the
emergence of such obstacles in the future, Member States and the Union should be required to use acommon concept of environmentally sustainable investment when setting up requirements forfinancial market participants or issuers for the purpose of labelling financial products or corporate
bonds marketed as environmentally sustainable at national and Union level. Provisions in thepresent Regulation referring to certificate-based tax incentive schemes that exist prior to the entry
into force of this Regulation, are without prejudice to the competences of the Union and of Member
States with respect to tax provisions, as set out by the Treaties.

(12) Establishing criteria for environmentally sustainable economic activities may encourage
economic operators not covered by this Regulation to publish and disclose on their websites, on a
voluntary basis, information on the environmentally sustainable economic activities they carry out.
This information will not only help financial market participants and other relevant actors in thefinancial markets to easily identify which economic operators carry out environmentally sustainableeconomic activities, but it will also make it easier for these economic operators to raise funding fortheir environmentally sustainable activities.

(13) A Union classification of environmentally sustainable economic activities should enable thedevelopment of future Union policies in support of sustainable finance, including Union-widestandards for environmentally sustainable financial products and eventually the establishment oflabels that formally recognise compliance with those standards across the Union, as well as to be thebasis for other economic and regulatory measures. Uniform legal requirements for considering thedegree of environmental sustainability of investments, based on uniform criteria for environmentally
sustainable economic activities, are necessary as a reference for future Union legislation aiming at
facilitating the shift of investments towards environmentally sustainable economic activities.

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(14) In the context of achieving SDGs in the Union, policy choices such as the creation of aEuropean Fund for Strategic Investment, have been effective in contributing to channel private
investment alongside public spending towards sustainable investments. Regulation (EU) 2015/1017
of the European Parliament and of the Council9 specifies a 40% horizontal climate investment target
for infrastructure and innovation projects under the European Fund for Strategic Investment.
Common criteria for the sustainability of economic activities, including environmental impact, could
underpin future similar initiatives of the Union mobilising investment pursuing climate-related orother environmental objectives.

(15) To avoid market fragmentation as well as harm to consumer interests due to divergent notionsof environmentally sustainable economic activities, national requirements that financial market
participants or issuers should comply with when they wish to market financial products or corporate
bonds as being environmentally sustainable, should build on the uniform criteria forenvironmentally sustainable economic activities. Those financial market participants or issuers
include financial market participants making available environmentally sustainable financial
products and non-financial companies issuing environmentally sustainable corporate bonds.

9

Regulation (EU) 2017/2396 of the European Parliament and of the Council of 13 December 2017 amending
Regulations (EU) No 1316/2013 and (EU) 2015/1017 as regards the extension of the duration of the European
Fund for Strategic Investments as well as the introduction of technical enhancements for that Fund and theEuropean Investment Advisory Hub (OJ L 345, 27.12.2017, p. 34).

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(16) To avoid harming consumer interests, fund managers and institutional investors offering
financial products, should disclose how and to what extent the criteria for environmentally
sustainable economic activities are used to determine the environmental sustainability of theinvestments. The information disclosed should enable investors to understand the share of theinvestment funding environmentally sustainable economic activities as a percentage of all economic
activities and thus the degree of environmental sustainability of the investment. Where a financial
product invests in an economic activity that contributes to an environmental objective, theinformation to be disclosed should specify the environmental objective or environmental objectives,to which the investment underlying the financial product contributes, as well as how and to what
extent the investments underlying the financial product fund environmentally sustainable economic
activities, including details on the respective proportions of enabling and transition activities. The
Commission should specify the information that needs to be disclosed for that purpose. That
information should enable national competent authorities to verify compliance with the disclosure
obligation easily, and to enforce that obligation in accordance with applicable national law. Where
financial market participants do not take into account the criteria for environmentally sustainable
investments they should provide a statement to this end.

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(16 -a)The Commission guidelines on non-financial reporting, providing a supplement on reporting
climate-related information (2019/C 209/01), recommend that large companies should report on
certain climate-related key performance indicators (KPIs) based on the framework established bythis Regulation. In particular, information on the proportion of such large non-financial companies’
turnover, Capital Expenditure (CapEx) or Operating Expenditure (OpEx), that are associated withenvironmentally sustainable economic activities, and KPIs that are tailored for large financial
companies provide useful information to investors, who are interested in companies whose products
and services substantially contribute to any one of the environmental objectives set out in thisRegulation. It is therefore appropriate to require the annual publication of such KPIs by those large
companies, and to further specify such requirement in delegated acts, in particular with regard oflarge financial companies. While it would be disproportionately burdensome to extend such arequirement to smaller companies, the latter may voluntarily decide to publish this information.

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(16a) The disclosure obligation laid down in this Regulation supplements the disclosure rules
enshrined in Regulation 2019/2088 on sustainability-related disclosures in the financial services
sector. To enhance transparency and to provide an objective point of comparison to end-investors
by financial market participants on the share of investments that fund environmentally sustainableeconomic activities, this Regulation supplements the disclosure requirements in the rules on precontractual and periodical transparency and transparency by means of websites laid down inRegulation 2019/2088 on sustainability-related disclosures in the financial services sector.
Regulation 2019/2088 includes within ‘sustainable investments’ investments that pursue
environmental objectives that, among others, should comprise investments into ‘environmentally
sustainable economic activities’ within the meaning of this Regulation.
Sustainable investments including environmentally sustainable investments should fulfil the “do no
significantly harm” requirement formulated in Article 2(17) of Regulation 2019/2088 on
sustainability-related disclosures in the financial services sector.
To ensure reliability, consistency and comparability of sustainability-related disclosures in thefinancial markets, disclosures related to this Regulation should use existing sustainability indicators
to the extent feasible as put forward by the European Parliament Own Initiative Report on
Sustainable Finance of 29 May 2018. In this context, the technical screening criteria should to theextent feasible, be based on the sustainability indicators in Regulation 2019/2088 on sustainabilityrelated disclosures in the financial services sector.

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(16e) Regarding economic activities carried out by undertakings that are not required to disclose
information under this Regulation, there could be exceptional cases where financial market
participants cannot reasonably obtain the relevant information to reliably determine the alignment
with the technical screening criteria. In such exceptional cases and only for those economic
activities for which complete, reliable and timely information could not be obtained, the financial
market participants may make complementary assessments and estimates on the basis of
information from other sources. Such assessments and estimates should only compensate for limited
and specific parts of the desired data elements, and produce a prudent outcome. In order to ensure
clear and not misleading disclosure to investors, financial market participants should clearly explain
the basis for their conclusions and the reasons for having to make such complementary assessments
and estimates for the purposes of disclosure to end-investors.

(17)

To avoid circumvention of the disclosure obligation, that obligation should also apply

where financial products are offered as promoting environmental characteristics, including thosehaving as their target environmental protection in a broad sense.

(18) For the purposes of determining the environmental sustainability of an economic activity, an
exhaustive list of environmental objectives should be laid down. The six environmental objectives
should be: climate change mitigation, climate change adaptation, sustainable use and protection ofwater and marine resources, transition to a circular economy, pollution prevention and control, andprotection and restoration of biodiversity and ecosystems.

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(18a) An economic activity that promotes the objective of climate change mitigation should
substantially contribute to the stabilisation of greenhouse gas emissions by avoiding or reducing
them or enhancing greenhouse gas removals. The economic activity should be consistent with thelong term temperature goal of the Paris Agreement. This environmental objective should beinterpreted in line with relevant Union law, including Council Directive 2009/31/EC on thegeological storage of CO2.

(18aa) An economic activity that promotes the objective of climate change adaptation should
substantially contribute to reducing or preventing adverse impact of the current or future climate orrisks of adverse impact, on that activity itself or people, nature and assets. This environmental
objective should be interpreted in line with relevant Union law and the Sendai Framework for
Disaster Risk Reduction 2015-2030.

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(18b) The environmental objective of sustainable use and protection of water and marine resources
should be interpreted in line with relevant Union law, including Regulation (EU) No 1380/201310
and Directives 2000/60/EC11, 2006/7/EC12, 2006/118/EC13, 2008/56/EC14 and 2008/105/EC15 of
the European Parliament and of the Council, Council Directives 91/271/EEC16, 91/676/EEC17 and98/83/EC18 and Commission Decision (EU) 2017/84819 and the communications of the Commissionof 18 July 2007 entitled "Addressing the challenge of water scarcity and droughts in the European
Union”, and of 14 November 2012 entitled “A Blueprint to Safeguard Europe's Water Resources”
and of 15 November 2012 entitled “A Fitness check of EU Freshwater policy” and of 11 March
2019 entitled “European Union Strategic Approach to Pharmaceuticals in the Environment”.

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Regulation (EU) No 1380/2013 of the European Parliament and of the Council of 11 December 2013 on the
Common Fisheries Policy, amending Council Regulations (EC) No 1954/2003 and (EC) No 1224/2009 andrepealing Council Regulations (EC) No 2371/2002 and (EC) No 639/2004 and Council Decision 2004/585/EC(OJ L 354, 28.12.2013, p. 22).
Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000 establishing aframework for Community action in the field of water policy (OJ L 327, 22.12.2000, p. 1).
Directive 2006/7/EC of the European Parliament and of the Council of 15 February 2006 concerning themanagement of bathing water quality and repealing Directive 76/160/EEC (OJ L 64, 4.3.2006, p. 37)
Directive 2006/118/EC of the European Parliament and of the Council of 12 December 2006 on the protectionof groundwater against pollution and deterioration (OJ L 372, 27.12.2006, p. 19).
Directive 2008/56/EC of the European Parliament and of the Council of 17 June 2008 establishing aframework for community action in the field of marine environmental policy (Marine Strategy Framework
Directive) (OJ L 164, 25.6.2008, p. 19).
Directive 2008/105/EC of the European Parliament and of the Council of 16 December 2008 on environmental
quality standards in the field of water policy, amending and subsequently repealing Council Directives
82/176/EEC, 83/513/EEC, 84/156/EEC, 84/491/EEC, 86/280/EEC and amending Directive 2000/60/EC of theEuropean Parliament and of the Council (OJ L 348, 24.12.2008, p. 84).
Council Directive 91/271/EEC of 21 May 1991 concerning urban waste water treatment (OJ L 135, 30.5.1991,
p. 40).
Council Directive 91/676/EEC of 12 December 1991 concerning the protection of waters against pollution
caused by nitrates from agricultural sources (OJ L 375, 31.12.1991, p. 1-8).
Council Directive 98/83/EC of 3 November 1998 on the quality of water intended for human consumption (OJ
L 330, 5.12.1998, p. 32).
Commission Decision (EU) 2017/848 of 17 May 2017 laying down criteria and methodological standards on
good environmental status of marine waters and specifications and standardised methods for monitoring andassessment, and repealing Decision 2010/477/EU (OJ L 125, 18.5.2017, p. 43).

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(18c) The environmental objective of the transition to a circular economy should be interpreted inline with relevant Union law in the area of circular economy, waste and chemicals, including
Regulations 1013/200620, 1907/200621 and 2019/102122 and Directives 2008/98/EC23, 94/62/EC24,
2000/53/EC25, 2006/66/EC26, 2011/65/EU27, 2012/19/EU28, 2010/75/EU29, (EU) 2019/88330 and(EU) 2019/90431 of the European Parliament and of the Council, Council Directive 1999/31/EC32,
Commission Regulation (EU) No 1357/201433 and Commission Decisions 2000/532/EC34 and2014/955/EU35 and the communications of the Commission of 2 December 2015 titled "Closing
the loop - An EU action plan for the Circular Economy" and of 16 January 2018 titled "A European
Strategy for Plastics in a Circular Economy".

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Regulation No 1013/2006 of the European Parliament and of the council of 14 June 2006 on shipments ofwaste (OJ L 190, 12.7.2006, p. 1–98).
Regulation No 1907/2006 of the European Parliament and of the council of 18 December 2006 concerning theRegistration, Evaluation, Authorisation and Restriction of Chemicals (REACH), establishing a European
Chemicals Agency, amending Directive 1999/45/EC and repealing Council Regulation (EEC) No 793/93 andCommission Regulation (EC) No 1488/94 as well as Council Directive 76/769/EEC and Commission
Directives 91/155/EEC, 93/67/EEC, 93/105/EC and 2000/21/EC (OJ L 396, 30.12.2006, p. 1–850) with
amendments.
Regulation (EU) 2019/1021 of the European Parliament and of the Council of 20 June 2019 on persistentorganic pollutants (OJ L 169, 25.6.2019, p. 45).
Directive 2008/98/EC of the European Parliament and of the Council of 19 November 2008 on waste andrepealing certain Directives (OJ L 312, 22.11.2008, p. 3).
European Parliament and Council Directive 94/62/EC of 20 December 1994 on packaging and packaging
waste (OJ L 365, 31.12.1994, p. 10).
Directive 2000/53/EC of the European Parliament and of the Council of 18 September 2000 on end-of life
vehicles (OJ L 269, 21.10.2000, p. 34).
Directive 2006/66/EC of the European Parliament and of the Council of 6 September 2006 on batteries andaccumulators and waste batteries and accumulators and repealing Directive 91/157/EEC (OJ L 266, 26.9.2006,
p. 1).
Directive 2011/65/EU of the European Parliament and of the Council of 8 June 2011 on the restriction of theuse of certain hazardous substances in electrical and electronic equipment Text with EEA relevance (OJ L 174,
1.7.2011, p. 88–110).
Directive 2012/19/EU of the European Parliament and of the Council of 4 July 2012 on waste electrical andelectronic equipment (WEEE) (OJ L 197, 24.7.2012, p. 38).
Directive 2010/75/EU of the European Parliament and of the Council of 24 November 2010 on industrial
emissions (integrated pollution prevention and control) (OJ L 334, 17.12.2010, p. 17).
Directive (EU) 2019/883 of the European Parliament and of the Council of 17 April 2019 on port reception
facilities for the delivery of waste from ships, amending Directive 2010/65/EU and repealing Directive
2000/59/EC (OJ L 151, 7.6.2019, p. 116).
Directive (EU) 2019/904 of the European Parliament and of the Council of 5 June 2019 on the reduction of the
impact of certain plastic products on the environment (OJ L 155, 12.6.2019, p. 1–19).
Council Directive 1999/31/EC of 26 April 1999 on the landfill of waste (OJ L 182, 16.7.1999, p. 1).
Commission Regulation (EU) No 1357/2014 of 18 December 2014 replacing Annex III to Directive
2008/98/EC of the European Parliament and of the Council on waste and repealing certain Directives (OJ L
365, 19.12.2014, p. 89).
Commission Decision of 3 May 2000 replacing Decision 94/3/EC establishing a list of wastes pursuant to
Article 1(a) of Council Directive 75/442/EEC on waste and Council Decision 94/904/EC establishing a list ofhazardous waste pursuant to Article 1(4) of Council Directive 91/689/EEC on hazardous waste (OJ L 226,
6.9.2000, p. 3).
Commission Decision of 18 December 2014 amending Decision 2000/532/EC on the list of waste pursuant to
Directive 2008/98/EC of the European Parliament and of the Council (OJ L 370, 30.12.2014, p. 44).

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An economic activity can substantially contribute to the objective of circular economy throughseveral means, including by increasing durability, reparability, upgradability and re-usability of
products, reducing resource use through design and choice of materials, facilitating repurposing,disassembly and deconstruction in the buildings and construction sector, in particular to reduce theuse of and promote the reuse of building materials, and developing ‘product-as-a-service’ businessmodels as well as circular value chains, with the aim to keep products, components and materials attheir highest utility and value. Similarly, reducing the content of hazardous substances in materials
and products throughout the lifecycle, including by replacing them with safer alternatives, should be
at least in line with the harmonized legal requirements laid down at Union level. An economic
activity can also substantially contribute to the objective of circular economy by reducing thegeneration of food waste in production, processing, manufacturing or distribution.
(18d) The environmental objective of pollution prevention and control should be interpreted in linewith relevant Union law, including Directives 2000/60/EC, 2004/35/CE36, 2004/107/EC37,
2006/118/EC, 2008/50/EC38, 2008/105/EC, 2010/75/EU, 2016/802/EU39 and 2016/2284/EU40 of
the European Parliament and of the Council.

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Directive 2004/35/CE of the European Parliament and of the Council of 21 April 2004 on environmental
liability with regard to the prevention and remedying of environmental damage (OJ L 143, 30.4.2004, p. 56).
Directive 2004/107/EC of the European Parliament and of the Council of 15 December 2004 relating toarsenic, cadmium, mercury, nickel and polycyclic aromatic hydrocarbons in ambient air (OJ L 23, 26.1.2005,
p. 3), as amended by Commission Directive (EU) 2015/1480 of 21 May 2008 (OJ L 226, 29.8.2015, p. 4).
Directive 2008/50/EC of the European Parliament and of the Council of 21 May 2008 on ambient air quality
and cleaner air for Europe (OJ L 152, 11.6.2008, p. 1).
Directive (EU) 2016/802 of the European Parliament and of the Council of 11 May 2016 relating to a
reduction in the sulphur content of certain liquid fuels (OJ L 132, 21.5.2016, p. 58).
Directive (EU) 2016/2284 of the European Parliament and of the Council of 14 December 2016 on the
reduction of national emissions of certain atmospheric pollutants (OJ L 344, 17.12.2016, p. 1).

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LIMITEEN(19) The environmental objective of protection and restoration of biodiversity and ecosystems
should be interpreted in line with relevant Union law, including Regulations 995/201041,
1143/201442 and 511/201443 and Directives 2009/147/EC of the European Parliament and of theCouncil44, Council Directives 91/67645 and 92/43/EEC46, , and the communications of theCommission of 21 May 2003 titled "Forest Law Enforcement, Governance and Trade (FLEGT)", of
3 May 2011 titled "Our life insurance, our natural capital: an EU biodiversity strategy to 2020" andof 6 May 2013 titled "Green Infrastructure (GI) – Enhancing Europe’s natural Capital", of 26
February 2016 titled "EU Action Plan against Wildlife Trafficking" and of 23 July 2019 titled"Stepping up EU Action to Protect and Restore the World’s Forests", and Council Regulation (EC)No 338/97 of 9 December 1996 on the protection of species of wild fauna and flora by regulating
trade therein47.

(19aa)

An economic activity can substantially contribute to the objective of protection andrestoration of biodiversity and ecosystems, through several means, including by protecting,conserving or restoring biodiversity and ecosystems, and as such by enhancing ecosystem services.
These services are grouped into four categories, namely provisioning, including the provisioning offood and water; regulating, including the control of climate and disease; supporting, including
nutrient cycles and oxygen production; and cultural, including spiritual and recreational benefits.

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Regulation (EU) No 995/2010 of the European Parliament and of the Council of 20 October 2010 laying down
the obligations of operators who place timber and timber products on the market (OJ L 295, 12.11.2010, p. 23).
Regulation (EU) No 1143/2014 of the European Parliament and of the Council of 22 October 2014 on theprevention and management of the introduction and spread of invasive alien species (OJ L 317, 4.11.2014, p.
35).
Regulation (EU) No 511/2014 of the European Parliament and of the Council of 16 April 2014 on compliancemeasures for users from the Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable
Sharing of Benefits Arising from their Utilization in the Union (OJ L 150, 20.5.2014, p. 59).
Directive 2009/147/EC of the European Parliament and of the Council of 30 November 2009 on theconservation of wild birds (OJ L 020, 26.1.2010, p. 7).
Council Directive 91/676/EEC of 12 December 1991 concerning the protection of waters against pollution
caused by nitrates from agricultural sources (OJ L 375, 31.12.1991, p. 1).
Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna andflora (OJ L 206, 22.7.1992, p. 7).
Council Regulation (EC) No 338/97 of 9 December 1996 on the protection of species of wild fauna and flora
by regulating trade therein (OJ L 61, 3.3.1997, p. 1-69)

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(19a) In the context of this Regulation, 'sustainable forest management should be understood byconsidering practices and use of forests and forest land that contribute to enhancing biodiversity or
to halting or preventing degradation of ecosystems, deforestation and habitat loss; by considering
the stewardship and use of forests and forest land in a way, and at a rate, that maintains theirbiodiversity, productivity, regeneration capacity, vitality and their potential to fulfil, now and in the
future, relevant ecological, economic and social functions, at local, national, and global levels, andthat does not cause damage to other ecosystems, as defined in Resolution H1 General Guidelines for
the Sustainable Management of Forests in Europe, MCPFE 1993; and by considering Regulation(EU) 2018/841[2] Regulation (EU) No 995/2010[3], Directive (EU) 2018/2001[4] and European
Forest Strategy: for forests and the forest based sector48,(19b) In the context of this Regulation, ‘energy efficiency’ is used in a broad sense and should beconsidered by taking into account the relevant Union law, including Directive (EU) 2012/2749,
Directive (EU) 2018/84450, as well as the products regulations laid down pursuant to Directive
2009/125/EC51, and Regulation (EU) 2017/136952.

48
49

50

51

52

Communication from the Commission to the European parliament, the Council, the European Economic andSocial Committee and the Committee of the Regions COM (2013) 659 final
Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012 on energy efficiency,
amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC
Directive (EU) 2018/2002 of the European Parliament and of the Council of 11 December 2018 amending
Directive 2012/27/EU on energy efficiency (OJ L 328, 21.12.2018, p. 210-230).
Directive (EU) 2018/844 of the European Parliament and of the Council of 30 May 2018 amending Directive
2010/31/EU on the energy performance of buildings and Directive 2012/27/EU on energy efficiency (OJ L
156, 19.6.2018, p.75-91)
Directive 2009/125/EC of the European Parliament and of the Council of 21 October 2009 establishing aframework for the setting of ecodesign requirements for energy-related products (OJ L 285, 31.10.2009, p. 1035)
Regulation (EU) 2017/1369 of the European Parliament and of the Council of 4 July 2017 setting a framework
for energy labelling and repealing Directive 2010/30/EU (OJ L 198, 28.7.2017, p.1-23)

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LIMITEEN(20) For each environmental objective, uniform criteria for considering economic activities to be
substantially contributing to that objective should be laid down. One element of the uniform criteria
should be to avoid significant harm to any of the environmental objectives set out in thisRegulation. This is in order to avoid that investments are considered environmentally sustainable
although the economic activities benefitting from those investments cause harm to the environment
to an extent outweighing their contribution to an environmental objective. The criteria should take
into account the life cycle of the products and services provided by that economic activity,
including evidence from existing life cycle assessments, notably by considering their production,
use and end-of-life, in addition to the environmental impacts of the economic activity itself.

(21) Recalling the joint commitment of the European Parliament, the Council and the Commission
to pursue the principles enshrined in the European Pillar of Social Rights in support of sustainable
and inclusive growth and recognising the relevance of international minimum human and labour
rights and standards, compliance with minimum safeguards should be a condition for economic
activities to qualify as environmentally sustainable. For that reason economic activities should only
qualify as environmentally sustainable where they are carried out in alignment with the OECD
Guidelines for Multinational Enterprises and UN Guiding Principles on Business and Human
Rights, including the International Labour Organisation’s (‘ILO’) declaration on Fundamental
Rights and Principles at Work, the eight ILO core conventions and the International Bill of Human
Rights. The ILO core conventions define human and labour rights that companies are should
respect. Several of those international standards are enshrined the Charter of Fundamental Rights ofthe European Union, in particular the prohibition of slavery and forced labour and the principle ofnon-discrimination. Those minimum safeguards are without prejudice to the application of more
stringent requirements on environment, health and safety and social sustainability set out in Union
law, where applicable.

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LIMITEENWhen implementing these minimum safeguards, undertakings should adhere to the principle of ‘donot significantly harm’ within the meaning of Regulation 2019/2088 on sustainability-related
disclosures in the financial services sector, including regulatory technical standards further
specifying that principle.

(21a) In order to ensure consistency between this Regulation and Regulation 2019/2088 on
sustainability-related disclosures in the financial services sector, this Regulation should amend
Regulation 2019/2088 on sustainability-related disclosures in the financial services sector to
introduce regulatory technical standards developed jointly by ESAs to further specify the details of
the presentation and content of the information in relation to the principle of ‘do not significantly
harm’. These regulatory technical standards should be consistent with the content, methodologies,
and presentation of indicators in relation to adverse impacts referred to in paragraphs 6 and 7 ofArticle 4. They should also be consistent with the principles enshrined in the European Pillar ofSocial Rights, the OECD Guidelines for Multinational Enterprises, UN Guiding Principles on
Business and Human Rights, including the International Labour Organisation’s (‘ILO’) declaration
on Fundamental Rights and Principles at Work, the eight ILO core conventions and theInternational Bill of Human Rights.
For the purposes of Article 16c of this Regulation, the European Banking Authority (‘EBA’),
European Insurance and Occupational Pensions Authority (‘EIOPA’) and the European Securities
and Markets Authority (‘ESMA’) (collectively known as the European Supervisory Authorities, the‘ESAs’) established by Regulation (EU) No 1093/2010 of the European Parliament and of theCouncil , Regulation (EU) No 1094/2010 of the European Parliament and of the Council andRegulation (EU) No 1095/2010 of the European Parliament and of the Council respectively should,
through the Joint Committee, develop draft regulatory technical standards to supplement Articles 2,8, 9 and 11 of Regulation 2019/2088 on sustainability-related disclosures in the financial services
sector.

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(22) Given the specific technical details needed to assess the environmental impact of an economic
activity and the fast-changing nature of both science and technology, the criteria of environmentally
sustainable economic activities should be adapted regularly to those changes. For the criteria to beup to date, based on scientific evidence and input from experts as well as relevant stakeholders, theconditions for substantial contribution and significant harm should be specified with moregranularity for different economic activities and should be updated regularly. For that purpose,
granular and calibrated technical screening criteria for the different economic activities should belaid down by the Commission, on the basis of the technical input of a multi-stakeholder Platform on
Sustainable Finance.

(23) Some economic activities have a negative impact on the environment, and a substantial
contribution to one or more environmental objectives can be achieved by reducing such negative
impact. For those economic activities, it is appropriate to set out technical screening criteria that
require a substantial improvement in environmental performance compared to, inter alia, theindustry average, but at the same time avoids environmentally harmful lock-in effects, including
carbon intensive lock-in effects, during the economic lifetime of the funded economic activity.
Those criteria should also consider the long-term impact of a specific economic activity.

(24) An economic activity should not be considered environmentally sustainable if it causes more
harm to the environment than the benefits it brings. The technical screening criteria should identify
the minimum requirements necessary to avoid a significant harm to other objectives including bybuilding on any minimum requirements laid down pursuant to Union law. When establishing andupdating the technical screening criteria, the Commission should ensure that those criteria are basedon available scientific evidence, are developed by taking into account life cycle considerations,
including existing life cycle assessments, and are updated regularly. Where scientific evaluation
does not allow for the risk to be determined with sufficient certainty, the precautionary principle
should apply, in line with Article 191 TFEU.

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(24a) In defining the technical screening criteria for the climate change mitigation objective, theCommission should take into account and incentivise the ongoing and necessary transition towards
a climate-neutral economy in accordance with Article 6(1a). The transition, in addition to the use ofclimate neutral energy and more investments in economic activities and sectors that are already low
carbon, requires substantial reductions in greenhouse gas emissions in other economic activities andsectors for which there are no technologically and economically feasible low carbon alternatives.
Those economic activities should be considered to substantially contribute to climate change
mitigation if their greenhouse gas emissions are substantially lower than sector or industry average,
they do not hamper the development and deployment of low-carbon alternatives and they do notlead to a lock-in in assets incompatible with the objective of climate-neutrality, considering the
economic lifetime of those assets. The technical screening criteria for these activities should ensurethat these transitional activities have a credible path towards climate neutrality, and these technicalscreening criteria should be adjusted accordingly at regular intervals.

(24b) An economic activity should be considered to contribute substantially to one or more of theenvironmental objectives set out in this regulation by directly enabling other activities to make a
substantial contribution to one or more of those objectives. For that purpose, that enabling activity
should not lead to a lock-in in assets that undermine long-term environmental goals, considering the
economic lifetime of those assets, and should have a substantial positive environmental impact on
the basis of lifecycle considerations.

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(25) When establishing and updating the technical screening criteria the Commission should take
into account relevant Union law, including the Regulation (EC) 66/2010 of the European Parliament
and the Council53, the EU Eco-Management and Audit Scheme54, the EU Green Public Procurement
criteria55, and the on-going work on Product and Organisation Environmental Footprint rules56. To
avoid unnecessary inconsistencies with classifications of economic activities that already exist forother purposes, the Commission should also take into account the statistical classifications relating
to the Environmental Goods and Services Sector, namely the Classification of Environmental
Protection Activities and Expenditure (CEPA) and the Classification of Resource Management
Activities (CReMA)57. When establishing and updating the technical screening criteria theCommission should take into account existing environmental indicators and reporting frameworks,
developed by, amongst others, the Commission, the EEA, and existing international standards, suchas those developed by, amongst the others, the OECD.

53
54

55

56
57

Regulation (EC) 66/2010 of the European Parliament and the Council of 25 November 2009 on the EU Ecolabel(OJ L 27, 30.1.2010, p. 1).
Regulation (EC) No 1221/2009 of the European Parliament and of the Council of 25 November 2009 on thevoluntary participation by organisations in a Community eco-management and audit scheme (EMAS), repealing
Regulation (EC) No 761/2001 and Commission Decisions 2001/681/EC and 2006/193/EC (OJ L 342,
22.12.2009, p. 1).
Communication from the Commission to the European Parliament, the Council, the European Economic andSocial Committee and the Committee of the Regions Public procurement for a better environment{SEC(2008)2124} {SEC(2008)2125} {SEC(2008)2126} COM(2008)0400.
2013/179/EU: Commission Recommendation of 9 April 2013 on the use of common methods to measure andcommunicate the life cycle environmental performance of products and organisations (OJ L 124, 4.5.2013, p. 1).
Annex 4 and 5 of Regulation (EU) No 538/2014 of the European Parliament and of the Council of 16 April
2014 amending Regulation (EU) No 691/2011 on European environmental economic accounts (OJ L 158,
27.5.2014, p.113).

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(26) When establishing and updating the technical screening criteria the Commission should also
take into account the specificities of the infrastructure sector and take into account environmental,social and economic externalities within a cost-benefit analysis. In that regard, the Commission
should consider relevant Union law and standards, including Directive 2001/42/EC of the European
Parliament and of the Council58, Directive 2011/92/EU of the European Parliament and of theCouncil59 Directive 2014/23/EU of the European Parliament and of the Council60, Directive
2014/24/EU of the European Parliament and of the Council61, Directive 2014/25/EU of theEuropean Parliament and of the Council62, as well as current methodology, as well as the work ofinternational organisations, such as the OECD. In that context, the technical screening criteria
should promote appropriate governance frameworks integrating environmental, social andgovernance factors, as referred to in the United Nations-supported Principles for Responsible
Investment63, at all stages of a project's lifecycle.

(27) The technical screening criteria should ensure that relevant economic activities within a
specific sector can qualify as environmentally sustainable and are treated equally if they contributeequally towards one or more of the environmental objectives laid out in this Regulation. The
potential capacity to contribute towards those environmental objectives may vary across sectors,
which should be reflected in the criteria. However, within each sector, those criteria should not
unfairly disadvantage certain economic activities over others if the former contribute towards theenvironmental objectives to the same extent as the latter.

58
59
60
61
62

63

Directive 2001/42/EC of the European Parliament and of the Council of 27 June 2001 on the assessment of theeffects of certain plans and programmes on the environment (OJ L 197, 21.7.2001, p. 30).
Directive 2011/92/EU of the European Parliament and of the Council of 13 December 2011 on the assessmentof the effects of certain public and private projects on the environment (OJ L 26, 28.1.2012, p. 1).
Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award ofconcession contracts (OJ L 94, 28.3.2014, p. 1).
Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public
procurement and repealing Directive 2004/18/EC (OJ L 94, 28.3.2014, p. 65).
Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement byentities operating in the water, energy, transport and postal services sectors and repealing Directive
2004/17/EC (OJ L 94, 28.3.2014, p. 243).
https://www.unpri.org/download?ac=1534.

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(28) When establishing technical screening criteria for environmentally sustainable activities, theCommission should assess whether the adoption of those criteria would give rise to stranded assets
or result in inconsistent incentives, or have any other adverse impact on financial markets.
(29) To avoid overly burdensome compliance costs on economic operators, the Commission
should establish technical screening criteria that provide for sufficient legal clarity, are practicable,
easy to apply and with which compliance can be verified within reasonable cost-of-complianceboundaries, avoiding unnecessary administrative burden. Technical screening criteria could require
carrying out a life cycle assessment when sufficiently practicable and needed.

(30) To ensure that investments are channelled towards economic activities that make the greatest
positive impact on the environmental objectives, the Commission should give priority to theestablishment of technical screening criteria for the economic activities that potentially contributemost to the environmental objectives.

(31) Appropriate technical screening criteria should be established for the transport sector,
including for mobile assets, which should take into account that the transport sector, includinginternational shipping, contributes close to 26% of total greenhouse gas emissions in the Union. As
stated in the Action Plan on Financing Sustainable Growth64 the transport sector represents about
30% of additional annual investment needs for sustainable development in the Union, including byincreasing electrification or transition to cleaner modes of transport by promoting modal shift andtraffic management.

64

COM(2018) 97 final.

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(32) When developing the technical screening criteria, it is of particular importance that theCommission carries out appropriate consultations in line with the Better Regulation requirements.
The process for the establishment and update of the technical screening criteria should involve
relevant stakeholders and build on the advice of experts with proven knowledge and experience inthe relevant areas. For that purpose, the Commission should set up a Platform on sustainablefinance. This Platform should be composed of experts representing both the public and the private
sector. Public sector representatives should include experts from the European Environmental
Agency, the European Supervisory Authorities and the European Investment Bank and theEuropean Union Agency for Fundamental Rights. Private sector experts should include financial
and non-financial market actors and business sectors, representing relevant industries, and thosewith accounting and reporting expertise. The Platform should also include experts representing civilsociety, including those with expertise in the field of environmental, social, labour and governanceissues. Financial Market Participants should be encouraged to inform the Commission if they
consider that an economic activity that does not meet the technical screening criteria, or for whichsuch criteria have not been established yet, should be considered environmentally sustainable, tohelp the Commission to evaluate the appropriateness of complementing or updating the technicalscreening criteria(32a) The Platform should be constituted in accordance with the applicable horizontal rules on thecreation and operation of Commission Expert Groups, including with regards to the selection
process, which should aim to ensure a high level of expertise, geographical and gender balance, as
well as a balanced representation of relevant know how, taking into account the specific tasks of the
Platform. During the selection process the Commission should, in accordance with the horizontal
rules, perform an assessment determining whether potential conflicts of interest exist and shouldtake the appropriate measures to deal with the conflict.

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(32aa) The Platform should advise the Commission on the development, analysis and review oftechnical screening criteria, including their potential impact on the valuation of assets that until the
adoption of the technical screening criteria were considered as environmentally sustainable assets
under existing market practices. The Platform should also advise the Commission on whether thetechnical screening criteria are suitable for further uses in future Union policy initiatives aimed at
facilitating sustainable investment and on the possible role of sustainability accounting andreporting standards in the application of the technical screening criteria. The Platform should advise
the Commission on developing further measures to improve data availability and quality taking into
account the objective of avoiding undue administrative burden, addressing other sustainability
objectives, including social objectives, and the functioning on minimum safeguards and the possibly
need to supplement them.

(32aaa) The Commission should continue the existing Member States Expert Group on sustainablefinance and provide the expert group with a formal status. The tasks of this expert group will, interalia, consist of advising the Commission on the appropriateness of the technical screening criteria
and the approach taken by the Platform with regard to developing these criteria. For this purpose,
the Commission should inform Member States through regular meetings of the Member States
Expert Group.

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(33) In order to specify the requirements set out in this Regulation, and particularly to establish andupdate granular and calibrated technical screening criteria for different economic activities as to what
constitutes a substantial contribution and significant harm to the environmental objectives, the power
to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union
should be delegated to the Commission in respect of the information required to comply with thedisclosure obligation set out in Articles 4delta (3) and 16c, and the technical screening criteria
mentioned in Article 6(2), Article 7(2), Article 8(2), Article 9(2), Article 10(2) and Article 11(2). It
is of particular importance that the Commission carry out appropriate consultations during its
preparatory work, including at expert level, such as through the Platform and the Member States
Expert Group, and that those consultations be conducted in accordance with the principles laid downin the Interinstitutional Agreement on Better Law-Making of 13 April 2016. In particular, to ensure
equal participation in the preparation of delegated acts, the European Parliament and the Council
should receive all documents at the same time as Member States’ experts, and the experts of theEuropean Parliament and the Council should systematically have access to meetings of Commission
expert groups dealing with the preparation of delegated acts.

(33a)This Regulation supplements the disclosure requirements laid down in Regulation

2019/2088 on sustainability-related disclosures in the financial services sector. To ensure theorderly and effective monitoring of compliance by financial market participants with thisRegulation, Member States should rely on the competent authorities designated in accordance with
Regulation 2019/2088 on sustainability-related disclosures in the financial services sector. In
addition, to enforce compliance, Member States should lay down rules on measures and penalties,
which should be effective, proportionate and dissuasive. National competent authorities, ESMA,
EBA, and EIOPA should exercise the product intervention powers laid down in PEPP, PRIIPS, and
MIFIR also with respect to misselling practices or misleading disclosures of sustainability-related
information, including the information requirements laid down in the Taxonomy Regulation.

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(33b) In order to ensure efficient and sustainable organization of the work and meeting practices bothregarding the Platform and the Member States Expert Group, and in order to enable broad
participation and efficient interaction within the groups, their subgroups, the Commission andstakeholders, the use of enhanced virtual and digital modalities, should be considered , whereappropriate.

(34) To give sufficient time to the relevant actors to familiarise themselves with the criteria forenvironmentally sustainable economic activities set out in this Regulation and to prepare for theirapplication, the obligations set out in this Regulation should become applicable, for eachenvironmental objective, 12 months after the relevant technical screening criteria have been
adopted.

(35) The application of this Regulation should be reviewed regularly in order to assess, amongst
others, the following elements:(i) the progress on the implementation of this Regulation with regard to the development oftechnical screening criteria for environmentally sustainable economic activities ;(ii) the possible need to revise and complement the criteria set out in this Regulation for
considering an economic activity environmentally sustainable;(iii) the effectiveness of the taxonomy in channelling private investments into sustainable
activities and in particular as regards the flows of capital into private enterprises and otherlegal entities; and(iv) further developing the current taxonomy and expanding its scope beyond environmentally
sustainable economic activities, in order to cover activities that significantly harm
environmental sustainability, as well as other sustainability objectives, including social
objectives.

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(36) Since the objectives of this Regulation cannot be sufficiently achieved by the Member States,
but can be better achieved at Union level, by reason of the need to introduce at Union level uniform
criteria for environmentally sustainable economic activities, the Union may adopt measures, inaccordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union.
In accordance with the principle of proportionality, as set out in that Article, this Regulation does not
go beyond what is necessary in order to achieve those objectives,

HAVE ADOPTED THIS REGULATION:

Chapter I
Subject matter, scope and definitions

Article 1
Subject matter and scope

1.

This Regulation establishes the criteria for determining whether an economic activity isenvironmentally sustainable for the purposes of establishing the degree of environmental
sustainability of an investment.

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LIMITEEN2.

This Regulation applies to:a. measures adopted by Member States or by the Union setting out any requirements on financial
market participants or issuers in respect of financial products or corporate bonds that are madeavailable as environmentally sustainable.
b. financial market participants making available financial productsc. undertakings which are subject to the obligation to publish a non-financial statement or aconsolidated non-financial statement pursuant to Articles 19a or 29a of Directive 2013/34/EU.

Article 2
Definitions

1.

For the purposes of this Regulation, the following definitions shall apply:(a)‘environmentally sustainable investment’ means an investment that funds one or several

economic activities that qualify under this Regulation as environmentally sustainable;(b)‘financial market participants’ means a financial market participants as defined in Article 2 (1)and Article 16 of Regulation 2019/2088 on sustainability-related disclosures in the financial services
sector;(c)'financial product' mean a financial product as defined in Article 2 (12) of Regulation

2019/2088 on sustainability-related disclosures in the financial services sector;

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(ca) ‘issuer’ means an issuer as defined in Article 2(h) of Regulation (EU) 2017/1129 of theEuropean Parliament and of the Council65;(d)'climate change mitigation' means the process of holding the increase in the global averagetemperature to well below 2 °C and pursuing efforts to limit it to 1.5 °C above pre-industrial levels,
as laid down the Paris Agreement;(e)‘climate change adaptation’ means the process of adjustment to actual and expected climatechange and its impacts;(f)'greenhouse gas' means a greenhouse gas listed in Annex I to Regulation (EU) No 525/2013 of

the European Parliament and of the Council66;(fa) ‘waste hierarchy’ means waste hierarchy as laid down in Article 4 of Directive 2008/98/EC of
the European Parliament and of the Council67;(g)'circular economy' means maintaining the value of products, materials and other resources inthe economy for as long as possible, enhancing their efficient use in production and consumption,
thus reducing the environmental impact of this use, minimising waste and the release of hazardous
substances at all stages of the life cycle, including through the application of the waste hierarchy;(ga) 'pollutants' means substances, vibrations, heat, noise, light or other contaminants present in air,water or land, which may be harmful to human health or the environment, which may result indamage to material property, or which may impair or interfere with amenities and other legitimate
uses of the environment;

65

66

67

Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus
to be published when securities are offered to the public or admitted to trading on a regulated market, andrepealing Directive 2003/71/EC (OJ L 168, 30.6.2017, p. 12).
Regulation (EU) No 525/2013 of the European Parliament and of the Council on a mechanism for monitoring
and reporting greenhouse gas emissions and for reporting other information at national and Union level relevant
to climate change and repealing Decision 280/2004/EC (OJ L 165, 18.6.2013, p. 13).
Directive 2008/98/EC of the European Parliament and of the Council of 19 November 2008 on waste andrepealing certain Directives (OJ L 312, 22.11.2008, p. 3).

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EN

(gb) ‘soil’ means the top layer of the Earth’s crust situated between the bedrock and the surface,which is composed of mineral particles, organic matter, water, air and living organisms;(h)'pollution' means:(i)the direct or indirect introduction, as a result of human activity, of pollutants into air,water or land;(ii)

in the context of the marine environment, pollution as defined in Article 3(8) of

Directive 2008/56/EC of the European Parliament and of the Council68;(iii) in the context of the water environment, pollution as defined in Article 2(33) of Directive
2000/60/EC of the European Parliament and of the Council69;(ha) ‘ecosystem’ means a dynamic complex of plant, animal, and micro-organism communities andtheir non-living environment interacting as a functional unit;(hb) 'ecosystem services' means the direct and indirect contributions of ecosystems to the economic,
social, cultural and other benefits that people derive from ecosystems.;(hc) ‘biodiversity’ means the variability among living organisms from all sources including, interalia, terrestrial, marine and other aquatic ecosystems and the ecological complexes of which they are
part; this includes diversity within species, between species and of ecosystems;(i)‘the good condition of an ecosystem’ means an ecosystem that is in a good physical, chemicaland biological condition or of a good physical, chemical and biological quality with selfreproduction or self-restoration capability, where species composition, ecosystem structure andecological functions are not impaired;68

69

Directive 2008/56/EC of the European Parliament and of the Council of 17 June 2008 establishing aframework for community action in the field of marine environmental policy (Marine Strategy Framework
Directive) (OJ L 164, 25.6.2008, p. 19–40).
Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000 establishing aframework for Community action in the field of water policy (Water Framework Directive) (OJ L 327,
22.12.2000, p. 1-73).

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LIMITEEN(j)'energy efficiency' means using energy more efficiently at all the stages of the energy chain

from production to final consumption;(k)‘good environmental status’ means good environmental status as defined in Article 3(5) of

Directive 2008/56/EC, as determined on the basis of the qualitative descriptors set out in Annex I to
Directive 2008/56/EC and as further specified in Commission Decision (EU) 2017/848;(ka) ‘good status’ means good chemical status and good ecological status in the case of surface
waters, and good chemical and good quantitative status in the case of groundwaters, as classified inaccordance with Annex V to Directive 2000/60/EC and with Directives 2008/105/EC and2006/118/EC;(kb) ‘good ecological potential’ means the status of a heavily modified or artificial body of water,
so classified in accordance with Annex V to Directive 2000/60/EC;(l)‘marine waters’ means marine waters as defined in Article 3(1) of Directive 2008/56/EC;(m) ‘surface water’ means surface water as defined in Article 2(1) of Directive 2000/60/EC70;(ma) ‘groundwater’ means groundwater as defined in Article 2(2) of Directive 2000/60/EC71;(o)‘competent authority’ means a national authority designated by a Member State to supervise

financial market participants in respect of their compliance with the requirements of this Regulation.

70
71

Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000 establishing aframework for Community action in the field of water policy (OJ L 327, 22.12.2000, p.1).
Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000 establishing aframework for Community action in the field of water policy (OJ L 327, 22.12.2000, p.1).

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Chapter II
Environmentally sustainable economic activities

Article 3
Criteria for environmentally sustainable economic activities

For the purposes of establishing the degree of environmental sustainability of an investment, an
economic activity shall be considered environmentally sustainable where that activity complies withall of the following criteria:(a)the economic activity contributes substantially to one or more of the environmental objectives
set out in Article 5 in accordance with Articles 6 to 11a;(b)

the economic activity does not significantly harm any of the environmental objectives set out
in Article 5 in accordance with Article 12;(c)the economic activity is carried out in compliance with the minimum safeguards laid down in
Article 13;(d)the economic activity complies with technical screening criteria that have been specified by
the Commission in accordance with Articles 6(2) 7(2), 8(2), 9(2), 10(2) and 11(2).

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Article 4
Use of the criteria for environmentally sustainable economic activities in public measures,standards and labels

Member States and the Union shall apply the criteria for determining environmentally sustainableeconomic activities set out in Article 3 for the purposes of any measures setting out requirements
financial market participants or issuers in respect of financial products or corporate bonds that are
made available as ‘environmentally sustainable’.

Article 4αTransparency of environmentally sustainable investments in pre-contractual disclosures andperiodic reports

Where a financial product referred to in Article 9(1), (2) and (3) of the Disclosure Regulation
invests in an economic activity that contributes to an environmental objective within the meaning of
Article 2(17) of that Regulation, the information to be disclosed in accordance with Articles 6(3)and 11(2) of that Regulation shall include the following:(a) the information on the environmental objective or environmental objectives to which theinvestment underlying the financial product contributes, as set out in Article 5;14970/19 ADD 1
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(b) a description of how and to what extent the investments underlying the financial product areinvested in environmentally sustainable economic activities, as set out in Article 3.
The description referred to in point (b) of the first subparagraph shall specify the share ofinvestments in environmentally sustainable economic activities, including details on the respective
proportions of enabling and transition activities, as a percentage of all investments selected for thefinancial product.

Article 4β
Transparency of financial products that promote environmental characteristics in pre-contractual
disclosures and periodic reports

Where a financial product referred to in Article 8(1) of the Disclosure Regulation promotes
environmental characteristics, Article 4α shall apply mutatis mutandis.
The information to be disclosed in accordance with Articles 6(3) and 11(2) of the Disclosure
Regulation shall be accompanied by the following statement:'The “do no significant harm” principle is applied only for the investments underlying the productthat take into account the EU criteria for environmentally sustainable investments.
The investments underlying the remaining portion of this financial product do not take into accountthe EU criteria for environmentally sustainable investments.'

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Article 4γ
Transparency of other financial products in pre-contractual disclosures and periodic reports

Where a financial product is not subject to Articles 8(1) and Articles 9(1), (2) and (3) of theDisclosure Regulation, the information to be disclosed in accordance with the provisions of sectoral
legislation referred to in Articles 6(3) and 11(2) of that Regulation shall be accompanied by thefollowing statement:‘The investments underlying this financial product do not take into account the EU criteria forenvironmentally sustainable investments.’

Article 4delta
Transparency of undertakings in non-financial statements

1. Any undertaking which is subject to the obligation to publish a non-financial information
pursuant to Articles 19a or 29a of Directive 2013/34/EU shall include in its non-financial statement
or consolidated non-financial statement information on how and to what extent the undertaking’s
activities are associated with environmentally sustainable economic activities as set out in Article 3
and Article 5.
2. In particular, non-financial undertakings shall disclose the following:(a) the proportion of their turnover derived from products or services associated withenvironmentally sustainable economic activities as set out in Article 3 and Article 5; and(b) the proportion of their total investments (Capital Expenditure) and/or expenditures (Operating
Expenditure) related to assets or processes associated with environmentally sustainable economic
activities as set out in Article 3 and Article 5.

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2013/34/EU in a separate report in accordance with paragraph 4 of Article 19a and paragraph 4 of
Article 29a of Directive 2013/34/EU, the information referred to in paragraph 1 and paragraph 2
shall be published in that separate report.
4. The Commission shall adopt a delegated act in accordance with Article 16 to supplement
paragraphs 1 and 2 to specify the application of those paragraphs, taking into account the
specificities of both financial and non-financial undertakings and the technical screening criteria set
out in accordance of this Regulation. The Commission shall adopt that delegated act by 1 June
2021.

Article 5
Environmental objectives

For the purposes of this Regulation, the following shall be environmental objectives:(1) climate change mitigation;(2) climate change adaptation;(3) sustainable use and protection of water and marine resources;(4) transition to a circular economy(5) pollution prevention and control;(6) protection and restoration of biodiversity and ecosystems.

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Article 6
Substantial contribution to climate change mitigation

1.

An economic activity shall be considered to contribute substantially to climate change

mitigation where that activity substantially contributes to the stabilization of greenhouse gas
concentrations in the atmosphere at a level which prevents dangerous anthropogenic interferencewith the climate system by avoiding or reducing greenhouse gas emissions or enhancing greenhousegas removals through any of the following means, including through process or product innovation,
consistent with the long term temperature goal of the Paris Agreement:(a)generating, transmitting, storing, distributing or using renewable energy in line with Directive(EU) 2018/2001, including through using innovative technology with a potential for significant
future savings or through necessary reinforcement or extension of the grid;(b)

improving energy efficiency except for power generation activities that are referred to in

Article 14(2a);(c)

increasing clean or climate-neutral mobility;(d)switching to the use of sustainably sourced renewable materials;(e)increasing the use of environmentally safe carbon capture and utilisation (CCU) and carbon

capture and storage (CCS) technologies that deliver a net reduction in greenhouse gas emissions;(fa) strengthening land carbon sinks, including through avoided deforestation and forest
degradation, restoration of forests, sustainable management and restoration of croplands, grasslands
and wetlands, afforestation, and regenerative agriculture;(g)establishing energy infrastructure required for enabling the decarbonisation of energy systems;(h)producing clean and efficient fuels from renewable or carbon-neutral sources;(i)

enabling any of the above in accordance with Article 11a.

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1a.

For the purposes of paragraph 1, an economic activity for which there is no technologicallyand economically feasible low carbon alternative, shall be considered to contribute substantially to
climate change mitigation as it supports the transition to a climate-neutral economy consistent witha pathway to limit the temperature increase to 1.5 degrees Celsius above pre-industrial levels
including by phasing out greenhouse gas emissions, in particular from solid fossil fuels, where that
activity:(i) has greenhouse gas emission levels that correspond to the best performance in the sector orindustry;(ii) does not hamper the development and deployment of low-carbon alternatives; and(iii) does not lead to a lock-in in carbon-intensive assets considering the economic lifetime of thoseassets.
For the purpose of this paragraph and the establishment of technical screening criteria in accordanceof Article 14, the Commission shall assess the potential contribution and feasibility of all relevant
existing technologies.
2.

Prior to adopting the delegated acts referred to in the second subparagraph, the Commission

shall gather all necessary expertise from the Platform regarding technical screening criteria.
The Commission shall adopt delegated act in accordance with Article 16 to:(a)supplement paragraph 1 and paragraph 1a to establish technical screening criteria for

determining under which conditions a specific economic activity is considered, for the purposes ofthis Regulation, to contribute substantially to climate change mitigation;(b)

supplement Article 12 to establish technical screening criteria, for each relevant

environmental objective, for determining whether an economic activity in respect of whichscreening criteria are established pursuant to point (a) of this paragraph is considered, for the
purposes of this Regulation, to cause significant harm to one or more of those objectives.

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The Commission shall establish the technical screening criteria referred to in paragraph 2 ofthis Article in one delegated act, taking into account the requirements laid down in Article 14.
4.

The Commission shall adopt the delegated act referred to in paragraph 2 by 31 December

2020, with a view to ensure its entry into application on 31 December 2021.

Article 7
Substantial contribution to climate change adaptation

1.

An economic activity shall be considered to contribute substantially to climate change

adaptation where:(a)that economic activity includes adaptation solutions that either substantially reduce the risk of

the adverse impact or substantially reduces the adverse impact of the current and expected futureclimate on that economic activity itself without increasing the risk of an adverse impact on otherpeople, nature and assets ; or where(b) that economic activity provides adaptation solutions that, in addition to the conditions laid downin Art 11a, contribute substantially to preventing or reducing the risk of the adverse impact or
substantially reduces the adverse impact of the current and expected future climate on other people,
nature or assets without increasing the risk of an adverse impact on other people, nature and assets.
1a.

The adaptation solutions referred to in point (a) of paragraph 1 shall be assessed andprioritised using the best available climate projections and shall, as a minimum, prevent or reduce:(a)the location-specific and context-specific adverse impact of climate change on the economic

activity; or(b)the adverse impact that climate change may have on the environment within which theeconomic activity takes place

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LIMITEEN(c)enabling any of the above in accordance with Article 11a.

2.

Prior to adopting the delegated acts referred to in the second subparagraph, the Commission

shall gather all necessary expertise from the Platform regarding technical screening criteria.
The Commission shall adopt delegated act in accordance with Article 16 to:(a)supplement paragraphs 1 and paragraph 1a to establish technical screening criteria for

determining under which conditions a specific economic activity is considered, for the purposes ofthis Regulation, to contribute substantially to climate change adaptation;(b)

supplement Article 12 to establish technical screening criteria, for each relevant

environmental objective, for determining whether an economic activity in respect of whichscreening criteria are established pursuant to point (a) of this paragraph is considered, for the
purposes of this Regulation, to cause significant harm to one or more of those objectives.
3.

The Commission shall establish the technical screening criteria referred to in paragraph 2 ofthis Article in one delegated act, taking into account the requirements laid down in Article 14.
4.

The Commission shall adopt the delegated act referred to in paragraph 2 by 31 December

2020, with a view to ensure its entry into application on 31 December 2021.

Article 8
Substantial contribution to sustainable use and protection of water and marine resources

1.

An economic activity shall be considered to contribute substantially to the sustainable use

and protection of water and marine resources where that activity substantially contributes toachieving the good status of water bodies, including surface water and groundwater bodies, or topreventing their deterioration when they are already in good status, or to achieving the goodenvironmental status of marine waters, or to preventing their deterioration when they are already ingood environmental status, through any of the following means:

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(a)protecting the environment from the adverse effects of urban and industrial waste water

discharges, including from contaminants of emerging concern such as pharmaceuticals andmicroplastics, including by ensuring the adequate collection, treatment and discharge of urban andindustrial waste waters;(b)protecting human health from the adverse impact of any contamination of water intended forhuman consumption by ensuring that it is free from any micro-organisms, parasites and substancesthat constitute a potential danger to human health as well as increasing citizens' access to clean
drinking water;(d)

improving water management and efficiency, including protecting and enhancing the status ofaquatic ecosystems, promoting sustainable water use based on long-term protection of available
water resources including using measures such as water reuse, ensuring the progressive reduction ofpollutant emissions into surface water and groundwater or contributing to mitigating the effects offloods and droughts, or any other activity that protects or improves the qualitative and quantitative
status of water bodies;(e)ensuring the sustainable use of marine ecosystem services or contributing to goodenvironmental status of marine waters, including by protecting, preserving or restoring the marine
environment and by preventing and reducing inputs in the marine environment.
(f)enabling any of the above in accordance with Article 11a.

2.

Prior to adopting the delegated acts referred to in the second subparagraph, the Commission

shall gather all necessary expertise from the Platform regarding technical screening criteria.
The Commission shall adopt delegated act in accordance with Article 16 to:(a)supplement paragraph 1 to establish technical screening criteria for determining under which

conditions a specific economic activity is considered, for the purposes of this Regulation, tocontribute substantially to sustainable use and protection of water and marine resources;

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(b)supplement Article 12 to establish technical screening criteria, for each relevant

environmental objective, for determining whether an economic activity in respect of whichscreening criteria are established pursuant to point (a) of this paragraph is considered, for the
purposes of this Regulation, to cause significant harm to one or more of those objectives.
3.

The Commission shall establish the technical screening criteria referred to in paragraph 2 ofthis Article in one delegated act, taking into account the requirements laid down in Article 14.
4.

The Commission shall adopt the delegated act referred to in paragraph 2 by 31 December

2021, with a view to ensure its entry into application on 31 December 2022.

Article 9
Substantial contribution to the circular economy

1.

An economic activity shall be considered to contribute substantially to the transition to acircular economy, including waste prevention, re-use and recycling where that activity contributes
substantially to that environmental objective through any of the following means:(a)improving the efficiency in the use of natural resources, including sustainably sourced bio-

based and other raw materials, in production, including through(i) reducing the use of primary raw materials or increasing the use of by-products andsecondary raw materials, and(ii) resource and energy efficiency measures;(b)increasing the durability, reparability, upgradability, or reusability of products, in particular indesigning and manufacturing activities;(c)increasing the recyclability of products, including of individual materials contained in

products, inter alia through substitution or reduced use of products and materials that are notrecyclable in particular in designing and manufacturing activities;

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LIMITEEN(d)substantially reducing the content of hazardous substances and substituting substances of very

high concern in materials and products throughout their lifecycle, in line with the objectives laid
down in Union law, including by replacing such substances with safer alternatives and ensuring
traceability;(e)prolonging the use of products including through reuse, design for longevity, repurposing,disassembly, remanufacturing, upgrades, repair and sharing;(f)increasing the use of secondary raw materials and their quality, including by high-quality

recycling of waste;(g)

preventing or reducing waste generation including from the extraction of minerals, and fromthe construction and demolition of buildings;
(h)
(ha)

increasing preparing for re-use and recycling of waste;increasing the development of waste management infrastructure needed for prevention,

preparing for re-use and recycling, while ensuring that the resulting recovered materials are recycled
as high-quality secondary raw material input in production, avoiding downcycling;(i)

minimising incineration and avoiding disposal (including landfilling) of waste, in accordancewith principles of the waste hierarchy;(j)

avoiding and reducing litter;(kb) enabling any of the above in accordance with Article 11a.
2.

Prior to adopting the delegated acts referred to in the second subparagraph, the Commission

shall gather all necessary expertise from the Platform regarding technical screening criteria.
The Commission shall adopt delegated act in accordance with Article 16 to:

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(a)supplement paragraph 1 to establish technical screening criteria for determining under which

conditions a specific economic activity is considered, for the purposes of this Regulation, tocontribute substantially to the transition to a more circular economy;(b)

supplement Article 12 to establish technical screening criteria, for each relevant

environmental objective, for determining whether an economic activity in respect of whichscreening criteria are established pursuant to point (a) of this paragraph is considered, for the
purposes of this Regulation, to cause significant harm to one or more of those objectives.
3.

The Commission shall establish the technical screening criteria referred to in paragraph 2 ofthis Article in one delegated act, taking into account the requirements laid down in Article 14.
4.

The Commission shall adopt the delegated act referred to in paragraph 2 by 31 December

2021, with a view to ensure its entry into application on 31 December 2022.

Article 10
Substantial contribution to pollution prevention and control

1.

An economic activity shall be considered to contribute substantially to pollution prevention

and control where that activity contributes substantially to environmental protection from pollution
through any of the following means:(a)preventing or, where that is not practicable, reducing pollutant emissions into air, water or land

other than greenhouse gasses;(b)

improving levels of air, water or soil quality in the areas in which the economic activity takes

place whilst minimizing negative impacts on, and risks to, human health and the environment;(c)

preventing or minimising adverse impacts on human health and the environment of the

production, use and disposal of chemicals;

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LIMITEEN(d)cleaning-up litter and other pollution.

(e)enabling any of the above in accordance with Article 11a.

2.

Prior to adopting the delegated acts referred to in the second subparagraph, the Commission

shall gather all necessary expertise from the Platform regarding technical screening criteria.
The Commission shall adopt delegated act in accordance with Article 16 to:(a)supplement paragraph 1 to establish technical screening criteria for determining under which

conditions a specific economic activity is considered, for the purposes of this Regulation, tocontribute substantially to pollution prevention and control as regards(b)supplement Article 12 to establish technical screening criteria, for each relevant

environmental objective, for determining whether an economic activity in respect of whichscreening criteria are established pursuant to point (a) of this paragraph is considered, for the
purposes of this Regulation, to cause significant harm to one or more of those objectives.
3.

The Commission shall establish the technical screening criteria referred to in paragraph 2 ofthis Article in one delegated act, taking into account the requirements laid down in Article 14.
4.

The Commission shall adopt the delegated act referred to in paragraph 2 by 31 December

2021, with a view to ensure its entry into application on 31 December 2022.

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Article 11
Substantial contribution to protection and restoration of biodiversity and ecosystems

1.

For the purposes of this Regulation, an economic activity shall be considered to contribute

substantially to the protection and restoration of biodiversity and ecosystems where that activity
contributes substantially to protecting, conserving or restoring biodiversity and to achieving thegood condition of ecosystems, or to protecting ecosystems that are already in good condition,
through any of the following means:(a) nature and biodiversity conservation, including achieving favourable conservation status of
natural and semi-natural habitats and species, or preventing their deterioration where they are alreadyin favourable status, protecting and restoring terrestrial, marine and other aquatic ecosystems in orderto improve their condition and enhance their capacity to provide services;(b)sustainable land use and management, including adequate protection of soil biodiversity, landdegradation neutrality, and the remediation of contaminated sites;(c)sustainable agricultural practices, including those that contribute to enhancing biodiversity or

to halting or preventing the degradation of soils and other ecosystems, deforestation and habitat loss;(d)sustainable forest management including practices and use of forests and forest land that

contribute to enhancing biodiversity or to halting or preventing degradation of ecosystems,
deforestation and habitat loss;(da) enabling any of the above in accordance with Article 11a.

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2.

Prior to adopting the delegated acts referred to in the second subparagraph, the Commission

shall gather all necessary expertise from the Platform regarding technical screening criteria.
The Commission shall adopt delegated acts in accordance with Article 16 to:(a)supplement paragraph 1 to establish technical screening criteria for determining under which

conditions a specific economic activity is considered, for the purposes of this Regulation, tocontribute substantially to the protection and restoration of biodiversity and ecosystems as regards(b)supplement Article 12 to establish technical screening criteria, for each relevant

environmental objective, for determining whether an economic activity in respect of whichscreening criteria are established pursuant to point (a) of this paragraph is considered, for the
purposes of this Regulation, to cause significant harm to one or more of those objectives.
3.

The Commission shall establish the technical screening criteria referred to in paragraph 2 ofthis Article in one delegated act, taking into account the requirements laid down in Article 14.
4.

The Commission shall adopt the delegated act referred to in paragraph 2 by 31 December

2021, with a view to ensure its entry into application on 31 December 2022.

Article 11a
Enabling activities

An economic activity shall be considered to contribute substantially to one or more of theenvironmental objectives set out in Article 5 by directly enabling other activities to make a
substantial contribution to one or more of those objectives, and where that activity:

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(a) does not lead to a lock-in in assets that undermine long-term environmental goals, considering
the economic lifetime of those assets;(b) has a substantial positive environmental impact on the basis of lifecycle considerations.

Article 12
Significant harm to environmental objectives

For the purposes of Article 3(b), taking into account the life cycle of the products and services
provided by an economic activity, including evidence from existing life cycle assessments, that
economic activity shall be considered as significantly harming:(a)climate change mitigation, where that activity leads to significant greenhouse gas emissions;(b)climate change adaptation, where that activity leads to an increased adverse impact of thecurrent and expected climate, on itself or for other people, nature and assets;(c)sustainable use and protection of water and marine resources, where that activity is detrimental

to the good status, or where relevant the good ecological potential, of water bodies, including surface
waters and groundwaters, or to the good environmental status of marine waters;(d)circular economy, including waste prevention and recycling, where that activity leads tosignificant inefficiencies in the use of materials and the direct or indirect use of natural resources
such as non-renewable energy sources, raw materials, water and land in one or more stages of thelife-cycle of products, including in terms of durability, reparability, upgradability, reusability or
recyclability of products; or where that activity leads to a significant increase in the generation,
incineration or disposal of waste, with the exception of incineration of non-recyclable hazardous
waste, or where the long term disposal of waste may cause significant and long-term harm to theenvironment;

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LIMITEEN(e)pollution prevention and control where that activity leads to a significant increase in theemissions of pollutants into air, water or land, as compared to the situation before the activity started;(f)

the protection and restoration of biodiversity and ecosystems, where that activity is detrimental

to a significant extent to the good condition and resilience of ecosystems or where that activity is
detrimental to the conservation status of habitats and species, including those of Community interest.
1a.

When assessing an economic activity against the criteria (a) to (f), the environmental impactsof the activity itself, as well as of the products and services provided by that activity throughout
their life cycle shall be taken into account, notably by considering their production, use and end-oflife.

Article 13
Minimum safeguards

The minimum safeguards referred to in point (c) of Article 3 shall be procedures implemented by
the undertaking that is carrying out an economic activity to ensure the alignment with the OECD
Guidelines for Multinational Enterprises and UN Guiding Principles on Business and Human
Rights, including the principles and rights set out in the eight fundamental conventions identified in
the International Labour Organisation’s declaration on Fundamental Rights and Principles at Workand the International Bill of Human Rights.
When implementing procedures to comply with the minimum safeguards referred to in Article 3(c),undertakings shall adhere to the principle of ‘do no significantly harm’ referred to in Article 2(17)of Regulation 2019/2088 on sustainability-related disclosures in the financial services sector.

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Article 14
Requirements for technical screening criteria

1.

The technical screening criteria adopted in accordance with Articles 6(2), 7(2), 8(2), 9(2),10(2) and 11(2) shall:(a)identify the most relevant potential contributions to the given environmental objective, while

respecting the principle of technological neutrality, considering both the short and long term impacts
of a given economic activity;(b)specify the minimum requirements that need to be met to avoid significant harm to all relevant

environmental objectives, considering both the short and long term impacts of a given economic
activity;(c)be quantitative and contain thresholds as far as possible, and be qualitative otherwise;(d)where appropriate, build upon Union labelling and certification schemes, Union

methodologies for assessing environmental footprint, and Union statistical classification systems,
and take into account any relevant existing Union legislation;(da) use sustainability indicators, as referred to in Article 4(6) of Regulation 2019/2088
on sustainability-related disclosures in the financial services sector, to the extent feasible;(e)be based on conclusive scientific evidence and the precautionary principle enshrined in article

191 TFEU;(f)take into account the life cycle, including evidence from existing life cycle assessments, byconsidering the environmental impacts of the economic activity itself, as well as of the products andservices provided by that economic activity, notably by considering their production, use and endof-life;

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whether it is a transitional activity referred to in Article 6(1a);and clearly indicate, where applicable, if the economic activity belongs to one of thecategories referred to in points (i) and (ii).
(h)

take into account the potential market impact of the transition to a more sustainable economy,

including the risk of certain assets becoming stranded as a result, as well as the risk of creating
inconsistent incentives for investing sustainably;(i)cover all relevant economic activities within a specific sector and ensure that those activities

are treated equally if they contribute equally towards one or more of the environmental objectives
laid down in Article 5 of this Regulation, to avoid distorting competition in the market;(j)

are easy to use and be set as to facilitate the verification of compliance with those criteria.

2.

The technical screening criteria referred to in paragraph 1 shall also include criteria for

activities related to the clean energy transition consistent with a pathway to limit the temperature
increase to 1.5 degrees Celsius above pre-industrial levels, in particular energy efficiency andrenewable energy, to the extent that those are substantially contributing to any of the environmental
objectives.
2a.

The technical screening criteria referred to in paragraph 1 shall ensure that power generation

activities that use solid fossil fuels are not considered environmentally sustainable economic
activities.
3.

The technical screening criteria referred to in paragraph 1 shall also include criteria for

activities related to the switch to clean or climate-neutral mobility, including through modal shift,efficiency measures and alternative fuels, to the extent that those are substantially contributing to anyof the environmental objectives.

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The Commission shall regularly review the technical screening criteria referred to inparagraph 1 and, where appropriate, amend the delegated acts adopted in accordance with thisRegulation in line with scientific and technological developments.
In that context, before amending or replacing a delegated act, the Commission shall assess theimplementation of those criteria taking into account the outcome of their application by financial
market participants and impact on capital markets, including channelling investments into
sustainable economic activities.
To ensure that economic activities referred to in Article 6(1a) remain on a credible transition
pathway consistent with a climate-neutral economy, the Commission shall review the technicalscreening criteria for those activities at least every 3 years and, where appropriate, amend thedelegated act referred to in Article 6(2) adopted in accordance with this Regulation in line with
scientific and technological developments.

Article 15
Platform on Sustainable Finance

1.

The Commission shall establish a Platform on sustainable finance. It shall be composed in abalanced manner of the following groups:(a)representatives of the following:(i)the European Environment Agency;(ii)

the European Supervisory Authorities;(iii) the European Investment Bank and the European Investment Fund;(iiia) the European Union Agency for Fundamental Rights;

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LIMITEEN(b)experts representing relevant private stakeholders, including financial and non-financial

market actors and business sectors, representing relevant industries, and those with accounting andreporting expertise;(ba) experts representing civil society, including those with expertise in the field of environmental,social, labour and governance issues;(c)experts appointed in a personal capacity, with proven knowledge and experience in the areas

covered by this Regulation;(d)experts representing academia, including universities, research institutes and other scientificorganisations, including those with global expertise.
2.

The Platform on Sustainable Finance shall:(a)advise the Commission on the technical screening criteria referred to in Article 14, and thepossible need to update those criteria;(b)analyse the impact of the technical screening criteria in terms of potential costs and benefits of

their application;(c)assist the Commission in analysing requests from stakeholders to develop or revise technicalscreening criteria for a given economic activity;(da) advise the Commission insofar appropriate on the possible role of sustainability accounting
and reporting standards in supporting the application of the technical screening criteria;(e)monitor and report regularly to the Commission on EU and Member State level trends

regarding capital flows towards sustainable investment;(ea) advise the Commission on the possible need to develop further measures to improve data
availability and quality;

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(eaa) advise the Commission on the usability of the technical screening criteria, taking into accountthe objective of avoiding undue administrative burden;(f)advise the Commission on the possible need to amend this Regulation;(fa) advise the Commission on the evaluation and development of sustainable finance policies,
including concerning policy coherence issues;(fb) advise the Commission on addressing other sustainability objectives, including social
objectives;(h)advise the Commission on the functioning of Article 13 and the possible need to supplement

the requirements thereof.
2a.

The Platform shall take into account a wide range of stakeholders’ views.

3.

The Platform shall be chaired by the Commission and constituted in accordance with thehorizontal rules on the creation and operation of Commission expert groups. In this context theCommission may invite experts with specific expertise on an ad hoc basis.
4. The Platform shall carry out its tasks in accordance with the principle of transparency. The
Commission shall publish minutes of the Platform meetings as well as other relevant documents on
the Commission website.
5. Where financial market participants consider that an economic activity which does not comply
with the technical screening criteria laid down in accordance with this Regulation or for which suchtechnical screening criteria have not been established yet, should be considered environmentally
sustainable, they may inform the Platform on Sustainable Finance.

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Article 15a
Competent authorities

1. Member States shall ensure that the competent authorities designated in accordance with
Regulation 2019/2088 on sustainability-related disclosures in the finances services sector monitor
the compliance of financial market participants with the requirements laid down in Articles 4alpha,beta, gamma of this Regulation. All competent authorities shall have all the supervisory andinvestigatory powers that are necessary for the exercise of their functions under this Regulation.
2. For the purposes of this Regulation, all competent authorities shall cooperate with each otherand shall provide each other, without undue delay, with such information as is relevant for the
purposes of carrying out their duties under this Regulation.

Article 15b
Measures and penalties

Member States shall lay down the rules on measures and penalties applicable to infringements ofArticle 4 (alfa, beta, and gamma). The measures and penalties provided for shall be effective,
proportionate and dissuasive.

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Article 16
Exercise of the delegation

1.

The power to adopt delegated acts is conferred on the Commission, subject to the conditions

laid down in this Article.
2.

The power to adopt delegated acts referred to in Articles 4delta(3), 6(2), 7(2), 8(2), 9(2), 10(2)and 11(2) shall be conferred on the Commission for an indeterminate period from [Date of entry
into force of this Regulation].
3.

The delegation of powers referred to in paragraph 2 may be revoked at any time by theEuropean Parliament or by the Council. A decision to revoke shall put an end to the delegation of
the power specified in that decision. It shall take effect the day following the publication of thedecision in the Official Journal of the European Union or at a later date specified therein. It shall notaffect the validity of any delegated acts already in force.
4.

The Commission shall gather all necessary expertise, prior to the adoption and during thedevelopment of delegated acts, including through the consultation of the experts of the Member
States Expert Group on Sustainable Finance (Member States Expert Group) referred to in Article
16b. Before adopting a delegated act, the Commission shall act in accordance with the principles
and procedures laid down in the Interinstitutional Agreement of 13 April 2016 on Better LawMaking.
5.

As soon as it adopts a delegated act, the Commission shall notify it simultaneously to theEuropean Parliament and to the Council.

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A delegated act adopted pursuant to Articles 4delta(3), 6(2), 7(2), 8(2), 9(2), 10(2) and 11(2)shall enter into force only if no objection has been expressed either by the European Parliament or
the Council within a period of two months of notification of that act to the European Parliament andthe Council or if, before the expiry of that period, the European Parliament and the Council haveboth informed the Commission that they will not object. That period shall be extended by twomonths at the initiative of the European Parliament or of the Council.

Article 16b
Member States Expert Group

1. A Member States Expert Group on Sustainable Finance (Member States Expert Group) shalladvise the Commission on the appropriateness of the technical screening criteria and the approachtaken by the Platform referred to in Article 15 regarding the developing of the criteria in accordancewith Article 14.
2. The Commission shall inform Member States through meetings of the expert group to facilitate
an exchange of views between the Member States and the Commission on a timely basis, inparticular as regards the key output of the Platform, such as new screening criteria or material
updates thereof, or draft reports.

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Article 16c
Amendments to Regulation 2019/2088 (Disclosure Regulation)

Regulation 2019/2088 (Disclosure Regulation) is amended as follows:

Article 2“new 2. The ESAs shall, through the Joint Committee, develop draft regulatory technical standards
to specify the details of the presentation and content of the information in relation to the principle of‘do not significantly harm’ in Article 2(17) consistent with the content, methodologies, andpresentation of indicators in relation to adverse impacts referred to in paragraphs 6 and 7 of Article
4.
The ESAs shall submit the draft regulatory technical standards referred to in the first subparagraphof this paragraph to the Commission by 1 December 2020.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory
technical standards referred to in the first subparagraph of this paragraph in accordance with
Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No
1095/2010.”

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Article 8
Transparency of the promotion of environmental or social characteristics in pre-contractual
disclosures“new 2a. Where financial market participants make available a financial product as referred to in
Article 4 beta of the Taxonomy Regulation, they shall include in the information to be disclosed
pursuant to Article 6(1) and (3) information pursuant to Article 4 beta of the Taxonomy
Regulation.”“new 4. The ESAs shall, through the Joint Committee, develop draft regulatory technical standards
to specify the details of the presentation and content of the information referred to Article new 2a ofthis Regulation.
When developing the draft regulatory technical standards referred to in the first subparagraph of thisparagraph, the ESAs shall take into account the various types of financial products, theircharacteristics and the differences between them, as well as the objective that disclosures are to beaccurate, fair, clear, not misleading, simple and concise and, to achieve that objective, to amend,
where necessary, regulatory technical standards referred to in paragraph 3. The draft regulatory
technical standards shall take into account application dates referred to in Article 18(2)(a) and (b) of
the Taxonomy Regulation in respect of the environmental objectives referred to in Article 5 of that
Regulation.

The ESAs shall submit the draft regulatory technical standards referred to in the first subparagraphof this paragraph to the Commission by 1 June 2021 in respect of the environmental objectives
referred to in Article 5(1) and 5(2) of the Taxonomy Regulation and by 1 June 2022 in respect of
the environmental objectives referred to in Articles 5(3), 5(4), 5(5) and 5(6) of the Taxonomy
Regulation.

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LIMITEENPower is delegated to the Commission to supplement this Regulation by adopting the regulatory
technical standards referred to in the first subparagraph of this paragraph in accordance with
Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No
1095/2010.”;

Article 9
Transparency of sustainable investments in pre-contractual disclosures“new 2a. Financial market participants shall include in the information to be disclosed pursuant to
Article 6(1) and (3) information pursuant Article 4 alpha of the Taxonomy Regulation.”“new 6. The ESAs shall, through the Joint Committee, develop draft regulatory technical standards
to specify the details of the presentation and content of the information referred to in New Article
new 2α of this Regulation.

When developing the draft regulatory technical standards referred to in the first subparagraph of thisparagraph, the ESAs shall take into account the various types of financial products, their objectives
as referred to in paragraphs 1, 2 and 3 and the differences between them as well as the objective that
disclosures are to be accurate, fair, clear, not misleading, simple and concise and, to achieve that
objective, to amend, where necessary, regulatory technical standards referred to in paragraph 5. The
draft regulatory technical standards shall take into account application dates referred to in Article
18(2)(a) and (b) of the Taxonomy Regulation in respect of the environmental objectives referred toin Article 5 of that Regulation.

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LIMITEENThe ESAs shall submit the draft regulatory technical standards referred to in the first subparagraphof this paragraph to the Commission by 1 June 2021 in respect of the environmental objectives
referred to in Article 5(1) and 5(2) of the Taxonomy Regulation and by 1 June 2022 in respect of
the environmental objectives referred to in Articles 5(3), 5(4), 5(5) and 5(6) of the Taxonomy
Regulation.

Power is delegated to the Commission to supplement this Regulation by adopting the regulatory
technical standards referred to in the first subparagraph of this paragraph in accordance with
Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No
1095/2010.”

Article 11
Transparency of the promotion of environmental or social characteristics and of sustainable
investments in periodic reports“new Article 11(1) (c) for a financial product subject to Article 4 alpha of the Taxonomy
Regulation, the information pursuant to Article 4 alpha of that Regulation;
new Article 11(1) (d) for a financial product subject to Article 4 beta of the Taxonomy Regulation,
the information pursuant to Article 4 beta of that Regulation.”

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“new 5. The ESAs shall, through the Joint Committee, develop draft regulatory technical standards
to specify the details of the presentation and content of the information referred to in Article new
11(1)c and new 11(1)d of this Regulation.

When developing the draft regulatory technical standards referred to in the first subparagraph of thisparagraph, the ESAs shall take into account the various types of financial products, theircharacteristics and objectives and the differences between them and amend, where necessary,
regulatory technical standards referred to in paragraph 4. The draft regulatory technical standards
shall take into account application dates referred to in Article 18(2)(a) and (b) of the Taxonomy
Regulation in respect of the environmental objectives referred to in Article 5 of that Regulation. The
ESAs shall update the regulatory technical standards in the light of regulatory and technologicaldevelopments.

The ESAs shall submit the draft regulatory technical standards referred to in the first subparagraphof this paragraph to the Commission by 1 June 2021 in respect of the environmental objectives
referred to in Article 5(1) and 5(2) of the Taxonomy Regulation and by 1 June 2022 in respect of
the environmental objectives referred to in Articles 5(3), 5(4), 5(5) and 5(6) of the Taxonomy
Regulation.

Power is delegated to the Commission to supplement this Regulation by adopting the regulatory
technical standards referred to in the first subparagraph of this paragraph in accordance with
Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No
1095/2010.”

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Chapter III
Final provisions

Article 17
Review
By [2 years after entry into force], and subsequently every three years thereafter, the Commission
shall publish a report on the application of this Regulation. That report shall evaluate the following:(a) the progress on the implementation of this Regulation with regard to the development oftechnical screening criteria for environmentally sustainable economic activities;(b) the possible need to revise and complement the criteria set out in this Regulation for considering
an economic activity environmentally sustainable;(c) the use of the definition of environmentally sustainable investment in Union law, and at Member
State level, including the provisions required for setting up verification mechanisms of compliancewith the criteria set out in this Regulation;(d) the effectiveness of the taxonomy in channelling private investments into sustainable activities
and in particular as regards the flows of capital into private enterprises and other legal entities,
particularly equity capital, on one hand through financial products referred to in this Regulation
and, on the other hand, through other financial products, in application of the technical screening
criteria;

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(e) access by financial markets participants referred to in this Regulation, and investors to reliable,
timely and verifiable information and data regarding companies and other legal entities, taking into
account related administrative burden, as well as modalities of verification of such data, necessary
in determining the degree of alignment with the technical screening criteria and ensuring
compliance with it, taking into account investees within and outside the scope of the Regulation andin both cases, as regards equity and debt capital;(f) supervisory provisions set out in Articles 15a and 15b.

By 31 December 2021, the Commission shall publish a report describing the provisions required forextending the scope of this Regulation to:(a) further develop the current taxonomy and expand its scope beyond environmentally sustainableeconomic activities in order to cover economic activities that do not have a significant impact onenvironmental sustainability as well as activities that do significantly harm environmental
sustainability as well as review the appropriateness of specific disclosure requirements related totransitional and enabling activities;(b) cover other sustainability objectives, including social objectives.
2. By [2 years after the entry into force], the Commission shall assess the effectiveness of theadvisory procedures for the development of the technical screening criteria set up by thisRegulation.

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Article 18
Entry into force and application

1.

This Regulation shall enter into force on the twentieth day following that of its publication in

the Official Journal of the European Union.
2.

Articles 4, 4alfa, 4beta, 4gamma and 4delta shall apply:(a)in respect of the environmental objectives referred to in points (1) and (2) of Article 5 by 31

December 2021;(b)

in respect of the environmental objectives referred to in points (3) to (6) of Article 5 by 31

December 2022.
3. Article 4 (1) shall not apply to certificate based tax incentive schemes that exist prior to the entry
into force of this Regulation setting out requirements for financial products that aim to financesustainable projects.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at …,
For the European Parliament

For the Council

The President

The President

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EN