COMMISSION STAFF WORKING DOCUMENT Accompanying the COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Strategy for Financing the Transition to a Sustainable Economy
Date: 2021-07-06
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: EU financing, EU investment, EU strategy, State aid, climate change policy, control of State aid, economic recovery, green economy, investment aid, sustainable development

EN 

  EN 

   EUROPEAN COMMISSION  Strasbourg, 6.7.2021  SWD(2021) 180 final  COMMISSION STAFF WORKING DOCUMENT   Accompanying the COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Strategy for Financing the Transition to a Sustainable Economy     {COM(2021) 390 final}  
 
 
Contents 

Introduction .......................................................................................................................................... 1 

1.  The foundations for a sustainable financial system ...................................................................... 2 

Thematic Box: Biodiversity in the sustainable finance agenda .................................................. 4 

2.  How  the  taxonomy  enables  transition  finance  and  connects  to  other  sustainable  finance 
initiatives ................................................................................................................................................ 

6 

Thematic Box: The role of sustainable finance for cities ........................................................... 8 

3.  The Commission’s global outreach for sustainable finance ......................................................... 8 

Annex I. Stocktake of the 2018 Action Plan implementation ............................................................ 11 

Action 1: Establishing a classification system for sustainable activities (EU Taxonomy).............. 11 

Action 2: Standards and labels for green financial products ........................................................... 12 

Action 3: Fostering investments in sustainable projects .................................................................. 13 

Action 4: Incorporating sustainability in financial advice ............................................................... 14 

Action 5: EU Climate Benchmarks and Benchmarks’ ESG Disclosures ........................................ 14 

Action 6: Better integrating sustainability in ratings and research .................................................. 16 

Action 7: Disclosures by financial market participants ................................................................... 16 

Action 8: Sustainability in prudential requirements ........................................................................ 17 

Action 9: Strengthening sustainability disclosures by corporates ................................................... 19 

Action 10: Fostering sustainable corporate governance & promoting long-termism ...................... 21 

 
 
 
 
 
 
 
Introduction 

This staff working document sets out the EU’s achievements since 2018 in the implementation of 
its domestic and international sustainable finance agenda. It provides an overview of the foundation 
that the new Strategy on Financing the Transition to a Sustainable Economy (‘the Strategy’) is built on. 
This stock take and the summary of the public stakeholder consultation conducted in mid-20201 are key 
background documents accompanying the Strategy. 

The  EU  sustainable  finance  agenda  supports  the  implementation  of  different  key  European 
Green Deal initiatives, including the Farm to Fork Strategy2, the New Circular Economy Action Plan3, 
the  Renovation  Wave  for  Europe4,  the  Biodiversity  Strategy  for  20305, the  Adaptation  Strategy6,  the 
Smart and Sustainable Mobility Strategy7 and the EU’s industrial strategy8 and the SME strategy9. 

The  Action  Plan  on  Financing  Sustainable  Growth  was  adopted  by  the  Commission  in  March 
2018.10 It builds on the final report11 of the High-Level Expert Group on Sustainable Finance (HLEG), 
which sets out strategic recommendations for a financial system that supports sustainable investments. 
The  2018  Action  Plan  aimed  to  achieve  three  main  goals,  divided  into  actions  across  the  whole 
investment chain. These goals were: (a) reorienting capital flows towards a more sustainable economy; 
(b)  mainstreaming  sustainability  into  risk  management;  and  (c)  fostering  transparency  and  long-
termism.  

With  the  2018  Action  Plan,  the  Commission  created  the  foundations  for  a  sustainable  finance 
system. The Commission is committed to completing the implementation (Section 1, complemented by 
the Annex 1 detailing the implementation of the different actions). 

Many  EU  sustainable  finance  initiatives  relate  to  the  EU  Taxonomy,  which  provides  common 
definitions for sustainable economic activities. This  document aims to provide clarity on the many 
connections between the different pieces of the sustainable finance framework and the EU Taxonomy 
(Section  2).  While  crucial,  the  EU  Taxonomy  is  not  the  only  reference  framework  used  in  the 
sustainable finance agenda. It is complemented by concepts, benchmarks and criteria laid out in other 

1 For the Summary Report of the Stakeholder Consultation on the Renewed Sustainable Finance Strategy, see here.  
2 Communication from the Commission, ‘A Farm to Fork Strategy’, COM/2020/381 final, 20.5.2020. see p. 17. 
3  Communication  from  the  Commission,  ‘A  new  Circular  Economy  Action  Plan  For  a  cleaner  and  more  competitive 
Europe’, COM/2020/98 final, 11.3.2020, see p. 12. 
4 Communication from the Commission, ‘A Renovation Wave for Europe - greening our buildings, creating jobs, improving 
lives’, COM/2020/662 final, 14.10.2020, see p. 5. 
5  Communication  from  the  Commission,  ‘EU  Biodiversity  Strategy  for  2030  Bringing  nature  back  into  our  lives’, 
COM/2020/380 final, 20.5.2020, see p. 18. 
6  Communication  from  the  Commission,  ‘Forging  a  climate-resilient  Europe  -  the  new  EU  Strategy  on  Adaptation  to 
Climate Change’, COM/2021/82 final, 24.2.2021, see p. 17. 
7 Communication from the Commission, ‘Sustainable and Smart Mobility Strategy – putting European transport on track for 
the future’, COM/2020/789 final, 9.12.2020, see p 18.  
8 Communication from  the  Commission,  ‘A New Industrial Strategy  for Europe’, COM  (2020) 102 final & Updating  the 
2020 ‘Industrial Strategy: Building a stronger Single Market for Europe’s recovery’, COM (2021) 350 final. 
9 Communication from the Commission, ‘An SME strategy for a sustainable and digital Europe’, COM(2020) 103 final. 
10 Communication from the Commission, ‘Action Plan: Financing Sustainable Growth’, COM(2018) 97 final, 8.3.2018. 
11 High Level Expert Group on Sustainable Finance, final report “Financing a sustainable European economy”, 31.1.2018, 
available here. 

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regulations,  such  as  the  Sustainable  Finance  Disclosure  Regulation  (SFDR)  or  the  proposal  for  the 
Corporate Sustainability Reporting Directive (CSRD).  

In  addition,  the  2018  Action  Plan  aimed  to  be  a  blueprint  for  launching  discussions  in 
international  forums.  Building  up  on  its  own  domestic  achievements,  the  EU  is  at  the  forefront  of 
global  efforts  and  is  leading  on  the  sustainable  finance  agenda  at  international  level.  The  European 
Commission- together  with  seven  other  jurisdictions  across  the  globe12  -  launched  the  International 
Platform on Sustainable Finance (IPSF) in October 201913. The IPSF is now acknowledged as one 
of the key international sustainable finance initiatives (Section 3). 

1.  The foundations for a sustainable financial system  

Starting  in 2018, the EU has gradually laid the foundations for a sustainable finance agenda  to 
make the transition to sustainability and a carbon neutral economy by 2050 possible. This is based on 
providing  investors  and  companies  with  relevant,  reliable  information  on  sustainability  opportunities 
and risks throughout the financial value chain.  

The  common  language  for  this  agenda  is  the  EU  Taxonomy,  which  sets  out  criteria  for 
identifying  economic  activities  substantially  contributing  to  climate  and  environmental 
objectives.  The  Taxonomy  Regulation,  adopted  on  18  June  202014,  created  a  robust,  science-based 
reference  system,  providing  a  clear  and  consistent  set  of  criteria  for  the  evaluation  of  economic 
activities in terms of their environmental sustainability. The EU Taxonomy allows investors to share a 
common  understanding  of  the  environmental  sustainability  impacts  of  their  investment  choices, 
ensuring  the  market  efficiently  channels  finance  to  sustainable  activities  and  providing  safeguards 
against greenwashing. Its technical screening criteria will be regularly updated and strengthened. The 
work  of  the  Commission  in  the  development  of  technical  screening  criteria  for  the  climate  and 
environmental objectives of the Taxonomy Regulation is described in Action 1 of the Strategy.15  

To provide investors with the information necessary to make sustainable investment choices, the 
EU  has  put  in  place  a  comprehensive  disclosure  regime  for  both  non-financial  and  financial 
institutions.  This  disclosure  regime  will  increase  transparency  about  Environmental,  Social  and 
Governance (ESG) impacts, risks and opportunities, as well as strengthen market discipline, discourage 
greenwashing and foster innovation in the design of financial products. 

  Basic  information  must  be  provided  by  non-financial  institutions  engaged  in  economic 
activities  that  have  an  impact  on  sustainability  and  are  exposed  to  sustainability  factors. 
Therefore,  companies  will  be  required  to  report  improved  sustainability  information  under  the 

12 Founding members: Argentina, Canada, Chile, China, India, Kenya, Morocco and the EU. 
13 The European Commission represents the EU and provides the Secretariat of the IPSF. See all the details about the IPSF, 
its objectives, membership and work plan in the Section 3 of this document. 
14 Regulation 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework 
to facilitate sustainable investment, and amending Regulation 2019/2088, OJ L 198, 22.6.2020, p. 13. 
15  For  more  information  on  the  EU  Taxonomy,  see  the  FAQ  on  ‘What  is  the  EU  Taxonomy  and  how  will  it  work  in 
practice?’ available here. The Commission has also developed the EU Taxonomy Compass, available here, which provides 
a visual representation of the contents of the EU Taxonomy, starting with the Delegated Act on the climate objectives, as 
adopted on 4 June 2021.  

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proposal for a Corporate Sustainability Reporting Directive (CSRD), proposed by the Commission 
in  April  202116.  The  CSRD  proposal  will  revise  and  strengthen  the  rules  introduced  in  the  Non-
Financial Reporting Directive (NFRD)17. If adopted, it would ensure that all large companies and 
all  listed  companies,  including  listed  SMEs  (except  listed  micro  enterprises),  disclose  relevant, 
reliable and comparable sustainability information. The proposal for the CSRD will be considered 
by the co-legislators and is expected to apply from 2023. 

  Financial market participants are required to disclose to their end investors the sustainability 
impact of their investment products, activities and processes. This obligation is enshrined in the 
Sustainable  Finance  Disclosure  Regulation  (SFDR)18,  which  applies  from  10  March  2021.  The 
SFDR increases the level and quality of information provided by financial market participants on 
sustainability,  including  adverse  impacts.  In  addition,  the  SFDR  requires  products  with  certain 
sustainability-related ambition to disclose their degree of Taxonomy-alignment.  

  Large non-financial and financial companies19 must meet additional disclosure requirements 
under the Taxonomy Regulation. Article 8 of the Taxonomy Regulation specifies the content of 
the disclosures to be made by large institutions on Taxonomy-alignment. A delegated act on Article 
8  disclosures,  adopted  on  6  July20,  provides  the  content,  methodology  and  presentation  of  the 
disclosures  that  large  European  companies  (including  financial  institutions)  will  need  to  make 
against the EU Taxonomy. 

  As  a  complement  to  the  sustainability  disclosure  regime,  sustainability  preferences  are  to  be 
included  in  investment  and  insurance  advice.  This  will  give  retail  investors  more  information 
and more choice. It will also empower retail investors to decide where and how their savings should 
be invested  and make a  tangible positive impact  on the climate,  environment and society, if they 
wish  to  do  so.  The  change  will  increase  the  demand  for  sustainable  investments  and  those  that 
consider  adverse  impact  on  sustainability.  To  this  end,  the  Commission  adopted  a  number  of 
delegated acts on 21 April 202121. 

16 Proposal for a directive amending Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and Regulation 
(EU) No 537/2014, as regards sustainable corporate reporting by certain undertakings, COM (2021) 189 final, 21.4.2021. 
17  Directive  2014/95/EU  of  the  European  Parliament  and  of  the  Council  of  22  October  2014  amending  Directive 
2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups Text 
with EEA relevance, OJ L 330, 15.11.2014, p. 1. 
18  Regulation  (EU)  2019/2088  of  the  European  Parliament  and  of  the  Council  of  27  November  2019  on  sustainability‐
related disclosures in the financial services sector, OJ L 317, 9.12.2019, p. 1. 
19  Undertakings  which  are  subject  to  publish  non-financial  information  pursuant  to  Art  19a  and  29a  of  Directive 
2013/34/EU. 
20  Commission  Delegated  Regulation  supplementing  Regulation  (EU)  2020/852  of  the  European  Parliament  and  of  the 
Council by specifying the content and presentation of information to be disclosed by undertakings subject to Article 19a or 
29a of Directive 2013/34/EU concerning environmentally sustainable economic activities, and specifying the methodology 
to comply with that disclosure obligation, adopted on 6 July 2021 and to be published in the Official Journal. . 
21  Commission  Delegated  Regulation  (EU)  2017/565  of  25  April  2016  supplementing  Directive  2014/65/EU  of  the 
European  Parliament  and  of  the  Council  as  regards  organisational  requirements  and  operating  conditions  for  investment 
firms and defined terms for the purposes of that Directive (OJ L 87, 31.3.2017, p. 1) and Commission Delegated Regulation 
(EU)  2017/2359  of  21  September  2017  supplementing  Directive  (EU)  2016/97  of  the  European  Parliament  and  of  the 
Council with regard to information requirements and conduct of business rules applicable to the distribution of insurance-
based investment products (OJ L 341, 20.12.2017, p. 8).  

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Easily accessible data will increase transparency for investors. The European Single Access Point 
(ESAP), as foreseen by the Capital Markets Union action plan, aims to create an EU-wide mechanism 
offering  easily  accessible  and  digitally  usable  information  based  on  companies’  public  reporting 
requirements. As part of the ESAP project, the Commission is considering how to improve access to 
ESG  information,  especially  to  information  to  be  reported  under  the  proposed  CSRD,  including 
Taxonomy-related information within such reporting. Easier access to and use of ESG information will 
enable a better integration of sustainability aspects in investment decision making. As such, the ESAP 
will support the objectives of the European Green Deal. 

Finally, the EU implemented a broad toolbox for companies, market participants and financial 
intermediaries to develop sustainable investment solutions, while preventing greenwashing. 

  The  EU  Climate  Benchmarks  Regulation,  adopted  on  27  November  2019,  introduced  the  EU 
Climate  Transition  Benchmarks  and  the  EU  Paris-aligned  Benchmarks,  as  well  as  sustainability-
related  disclosures  for  all  benchmarks22.  The  use  of  credible,  reliable  climate  and  sustainability 
benchmarks  provide  investors  with  further  investment  opportunities  aligned  with  climate  and 
environmental goals, by providing transparency to investors and preventing greenwashing.  

  The Commission presented a legislative proposal for a standard on European green bonds on 
6 July  202123 to  create a  high-quality standard  available to  all green bond issuers on a voluntary 
basis. The standard would give issuers a reliable means to demonstrate the Taxonomy-alignment of 
green projects to be financed and to support the transitioning of economic activities to sustainable 
outcomes.  

  An EU green label for retail financial products is envisaged under the 2018 Action Plan and is 
currently  being  developed  by  the  Commission,  based  on  the  EU  Ecolabel  Regulation  66/2010.  It 
will  be  adopted  in  2022  and  will  provide  retail  investors  with  a  credible,  reliable  and  widely 
recognised label for retail financial products. 

These  policy  foundations  provide  a  framework  for  private  investments  to  flow  to  sustainable 
economic activities on an efficient, consistent basis. While considerable progress has been made on 
these  building  blocks,  further  work  is  required  in  the  coming  years.  In  moving  forward  with  this 
Strategy,  there  will  be  a  particular  need  to  ensure  that  the  framework  is  comprehensive  and  flexible 
enough to accommodate a successful transition to Green Deal objectives. 

Thematic Box: Biodiversity in the sustainable finance agenda 

The  loss  of  biodiversity  and  depletion  of  natural  resources  are  accelerating  and  action  must  be 
scaled  up.  The  conservation,  sustainable  use  and  restoration  of  biodiversity  can  provide  significant 
business  opportunities,  including  long-term  viability  of  business  models  and  increases  in  operational 
efficiency  and  market  share.  At  the  same  time,  businesses  and  financial  institutions  are  impacting 
biodiversity  and  ecosystems  with  their  business  and  financing  decisions.  Businesses  and  financial 

22 Regulation (EU) 2019/2089 of the European Parliament and of the Council of 27 November 2019 amending Regulation 
(EU)  2016/1011  as  regards  EU  Climate  Transition  Benchmarks,  EU  Paris-aligned  Benchmarks  and  sustainability-related 
disclosures for benchmarks, OJ L 317, 9.12.2019, p. 17. Further information is available here.  
23 Proposal for a Regulation of the European Parliament and of the Council on European green bonds, COM/2021/391 final, 
6.7.2021. 

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institutions  should  integrate  biodiversity  factors  in  their  operations,  supply  chains  and  investment 
decisions24. 

The EU Biodiversity Strategy provides a comprehensive, long-term plan to protect nature and reverse 
the degradation of ecosystems. The strategy aims to put Europe’s biodiversity on a path to recovery by 
2030,  noting  the  post-COVID-19  context.  It  is  launched  in  the  context  of  the  upcoming  UN 
Biodiversity Conference (Biodiversity COP15), hosted by China in October 2021, where governments 
will convene to agree on a new set of goals for nature over the next decade. 

Biodiversity  is  also  an  important  feature  of  the  EU  sustainable  finance  agenda.  One  of  the  six 
environmental  objectives  laid  out  by  the  Taxonomy  Regulation  (Article  9)  is  the  protection  and 
restoration  of  biodiversity  and  ecosystems.  Article  15  of  the  Taxonomy  Regulation  notes  how  an 
economic activity can substantially contribute to  this objective25. In this regard, the Commission will 
adopt a delegated act establishing technical screening criteria for this objective, together with the other 
environmental objectives (sustainable use and protection of water and marine resources; transition to a 
circular economy; pollution prevention and control). The SFDR defines ‘sustainable investment’ as ‘an 
investment  in  an  economic  activity  that  contributes  to  an  environmental  objective,  as  measured,  for 
example, by key resource efficiency indicators […] on its impact on biodiversity’26. Furthermore, the 
legislative  proposal  for  a  Corporate  Sustainable  Reporting  Directive  (CSRD)  identifies  the 
environmental  factors  that  should  be  addressed  by  sustainability  reporting  standards,  including 
biodiversity and ecosystems. 

Another  initiative  supported  by  the  Commission  is  the  ALIGN  project  -  ‘Aligning  Accounting 
Approaches  for  Nature’  to  support  businesses  in  developing  standardised  accounting  practices  for 
natural  capital  and  biodiversity.  It  will  establish  a  dedicated  natural  capital  management  accounting 
platform  for  facilitating  the  exchange  of  best  practices  among  business  practitioners  as  well  as  a 
business driven discussion and alignment process. In the context of the EU Business and Biodiversity 
Platform, the Commission is also intensifying its engagement with the industry with the aim to align 
their approaches to better take into account their relationship with nature.  

24  Organization  for  Economic  Co-operation  and  Development  (2019),  ‘Biodiversity:  Finance  and  the  Economic  and 
Business Case for Action’, report prepared for the G7 Environment Ministers’ Meeting, 5-6 May 2019. 
25 Article 15(1) of the Taxonomy Regulation: ‘[…] (a) nature and biodiversity conservation, including achieving favourable 
conservation  status  of  natural  and  semi-natural  habitats  and  species,  or  preventing  their  deterioration  where  they  already 
have favourable conservation status, and protecting and restoring terrestrial, marine and other aquatic ecosystems in order to 
improve their condition and enhance their capacity to provide ecosystem services; (b) sustainable land use and management, 
including adequate protection of soil biodiversity, land degradation 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 uses of forests and forest land that contribute to enhancing biodiversity or to halting or preventing degradation 
of ecosystems, deforestation and habitat loss; or (e) enabling any of the activities from (a) to (d) […]’. 
26 Article 2(17) of the Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on 
sustainability‐ related disclosures in the financial services sector, OJ L 317, 9.12.2019, p. 8.  

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2.  How  the  taxonomy  enables  transition  finance  and  connects  to  other  sustainable  finance 

initiatives  

The policy tools in the 2018 Action Plan are interconnected and rely on common definitions.  

This section aims to provide an overview of how different sustainable finance policies connect with the 
EU  Taxonomy  to  create  a  comprehensive,  coherent  landscape.  The  EU  Taxonomy  will  play  an 
important role in creating a standard for European green bonds and the EU Ecolabel for retail financial 
products. 

1) Taxonomy and retail investments: sustainability preferences as a top up to the suitability test 
in investment and insurance advice27. Clients’ sustainability preferences can be addressed in several 
ways,  including  by  offering  financial  instruments  which  are  invested,  at  least  to  some  extent,  in 
taxonomy-compliant  activities  or  in  sustainable  investments,  or  that  consider  the  adverse  impact  of 
investments  on  the  environment  or  society.  The  amendments  to  the  suitability  test  do  not  state  how 
much a given instrument should be invested in taxonomy-compliant activities: this should be the result 
of  a  dialogue  between  an  adviser  and  a  potential  client.  The  client  should  ultimately  determine  their 
specific environmental ambition.  

2) Financial market participants28 creating a financial product that promotes environmental or social 
characteristics (Article 8 of the SFDR- Regulation) or pursues sustainable investments (Article 9 of the 

27 More details on the April package and the amendments to the suitability test are available here.  
28  ‘Financial  market  participant’  means  an  insurance  undertaking  which  makes  available  an  insurance‐ based  investment 
product  (IBIP);  an  investment  firm  which  provides  portfolio  management;  an  institution  for  occupational  retirement 
provision (IORP); a manufacturer of a pension product; an alternative investment fund manager (AIFM); a pan‐ European 
personal  pension  product  (PEPP)  provider;  a  manager  of  a  qualifying  venture  capital  fund  registered  in  accordance  with 
Article  14  of  Regulation  (EU)  No  345/2013;  a  manager  of  a  qualifying  social  entrepreneurship  fund  registered  in 

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SFDR-  Regulation)  must  describe  how  and  to  what  extent  the  investments  underlying  the  financial 
product are taxonomy-aligned activities (Article 5 to 7 of the Taxonomy Regulation). In addition, the 
Taxonomy Regulation empowers the European Supervisory Authorities (ESAs), by implementing the 
SFDR,  to  develop  further  regulatory  technical  standards  (RTS)  on  ‘Taxonomy-related  product 
disclosures’. 

3) The EU Ecolabel for retail financial products would require the use of the Taxonomy for financial 
products eligibility criteria.  

4) The EU Climate Benchmarks Regulation laid down minimum  standards for the  creation of two 
types  of  climate  benchmarks:  EU  Climate  Transition  and  EU  Paris-aligned  Benchmarks.  By  31 
December  2022,  the  Commission  shall  review  the  minimum  standards  for  both  EU  Climate 
Benchmarks  to  ensure  that  the  selection  of  the  underlying  assets  is  coherent  with  sustainable 
investments to ensure consistency with the EU Taxonomy. 

5) The legislative proposal on a standard for European green bonds, adopted by the Commission 
on  6  July29,  would  require  that  issuers  using  the  standard  fully  align  investments  financed  by  bond 
proceeds with the EU Taxonomy.  

In addition, the Taxonomy Regulation requires Member States and the EU to use the EU Taxonomy as 
the basis of any measure setting out requirements for financial market participants or issuers in respect 
of financial products or corporate bonds that are made available as environmentally sustainable. 

6)  Large  financial  and  non-financial  companies  (undertakings  under  article  19a  and  29a  of  the 
Directive 2013/34/EU30) will have to disclose on how and to what extent the activities they carry out 
meet the criteria set out in the EU Taxonomy. The delegated act on Taxonomy disclosures under article 
8  of  the  Taxonomy  Regulation  adopted  on  6  July  2021  specifies  the  content  and  presentation  of  the 
information to be disclosed by these companies31.  

In addition to the mandatory uses in the Taxonomy Regulation outlined above, there are other EU or 
national policies that may refer to the Taxonomy Regulation. Such uses are not defined or mandated in 
the Taxonomy Regulation itself but may look for coherence with the EU Taxonomy. 

7)  The  Recovery  and  Resilience  Facility32  uses  the  ‘do  no  significant  harm’  principle  of  the  EU 
Taxonomy, which is applied within the meaning of Article 17 of the Taxonomy Regulation but without 

accordance  with  Article  15  of  Regulation  (EU)  No  346/2013;  a  management  company  of  an  undertaking  for  collective 
investment  in  transferable  securities  (UCITS  management  company);  or  a  credit  institution  which  provides  portfolio 
management; 
29 Proposal for a Regulation of the European Parliament and of the Council on European green bonds, COM/2021/391 final, 
6.7.2021. 
30 Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, 
consolidated financial  statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of 
the  European  Parliament  and  of  the  Council  and  repealing  Council  Directives  78/660/EEC  and  83/349/EEC,  OJ  L  182, 
29.6.2013, p.19.  
31 Commission Delegated Regulation (EU) supplementing Regulation (EU) 2020/852 of the European Parliament and of the 
Council by specifying the content and presentation of information to be disclosed by undertakings subject to Article 19a or 
29a of Directive 2013/34/EU concerning environmentally sustainable economic activities, and specifying the methodology 
to comply with that disclosure obligation, adopted on 6 July 2021 and to be published in the Official Journal. 
32 Regulation (EU) 2021/241 of the European Parliament and of the Council of 12 February 2021 establishing the Recovery 
and Resilience Facility, OJ L 57, 18.2.2021, p. 17. 

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requiring the use of the delegated acts and related technical screening criteria. On 12 February 2021 the 
Commission  published a technical  guidance document33, providing more details  on how to  apply the 
‘do no significant harm’ principle for the purposes of the RRF. 

8) The InvestEU programme takes into account, where appropriate, the EU Taxonomy criteria in the 
two guidance documents for InvestEU implementing partners on climate and environmental tracking as 
well as on the sustainability proofing. This will act as an incentive for public financial institutions to 
use the EU Taxonomy framework when assessing the sustainability of potential investments. 

In addition, the objectives of the EU regional, cohesion and social funds for the period of 2021-2027 
shall be pursued in line with the ‘do no significant harm’ principle within the meaning of Article 17 of 
the  Taxonomy  Regulation  but  without  requiring  the  use  of  the  delegated  acts  and  related  technical 
screening criteria.  

Thematic Box: The role of sustainable finance for cities  
Cities account for more than 65% of energy consumption and more than 70% of CO2 emissions 
worldwide: they should be at the forefront of EU efforts to deliver on the European Green Deal. The 
Sustainable and Smart Mobility Strategy34 set a target for 100 European cities to be climate neutral by 
2030. The planned EU Mission for ‘Climate neutral and smart cities’ aims to help 100 cities reach this 
goal and to pave the way for all other European cities to follow suit by 2050. A wide array of funding 
and  financing  instruments  will  be  needed,  as  public  spending  will  not  be  sufficient  to  address  cities’ 
financial needs. Cities are key actors in a circular economy. 

Sustainable  finance  offers  an  opportunity  for  investors  to  see  the  tangible  benefits  of  their 
investment  locally  and  to  create  viable  business  models  to  secure  funding  with  citizen  support. 
Green  financial  instruments,  such  as  green  municipal  bonds,  sustainability-linked bonds  and  retail 
green bonds can help increase the quantity and quality of spending in cities while redirecting resources 
toward  green investment. Communication and promotion  activities must also  be explored to  increase 
the  impact  of  local  investment  on  climate  neutrality  and  increase  ownership  of  the  transformation 
process.  

3.  The Commission’s global outreach for sustainable finance 

Climate change is a global threat to our environment, economy and society. Addressing the financing 
needs for the transition internationally requires, on the one hand, the development of policy initiatives 
and tools to support the scale up of sustainable finance and, on the other hand, the coordination of these 
initiatives among international policymakers.  

It  is  against  this  background  that  the  EU,  represented  by  the  Commission, created  the 
International  Platform  on  Sustainable  (IPSF)  along  with seven  other jurisdictions.  The  IPSF was 
launched in  October  2019  with the  objective  of  promoting integrated  markets  for  sustainable 

33  European  Commission,  Technical  guidance  on  the  application  of  ‘do  no  significant  harm’  under  the  Recovery  and 
Resilience Facility Regulation, C(2021) 1054 final, 12.2.2021. 
34  Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European  Economic  and  Social 
Committee and the Committee of the Regions, ’Sustainable and Smart Mobility Strategy  – putting European transport on 
track for the future’, COM(2020) 789 final, 9.12.2020. 

8 

 
                                                 
finance and  thereby  facilitating  the  mobilisation  of  international  investors.  The  IPSF  today  has  17 
members35,  more  than  doubling  its  membership  in  one  year,  and firmly  features  in  international 
discussions on sustainable finance initiatives. 

The IPSF focuses on areas that allow investors to seize sustainable investment opportunities such 
as  taxonomies,  sustainability-related  disclosures  and 
labels  and  standards  for  financial 
products. It is  complementary  to  other  international  networks,  such  as  the  Network  for Greening 
the Financial System (NGFS) and the Coalition of Finance Ministers, which joined forces by taking up 
an  observer  role  in  the  IPSF,  together  with  other  key  international  organisations  and  public  financial 
institutions36. 

The  first  annual  report  published  in  October  2020  confirmed  the  promising  growth  in 
sustainable finance markets worldwide and the importance of these tools for continuing to scale up 
volumes  to  meet  global  environmental  challenges. To  this  end,  dedicated  IPSF  working  groups  are 
underway  on  green  taxonomies  and  on  sustainability-related  disclosures. The  IPSF,  as  a  knowledge 
partner, will also be a key contributor to the G20 Sustainable Finance Working Group.  

By autumn 2021, the IPSF will deliver three public reports:  

-  The  report  on  a common  ground  Taxonomy  will  compare  the  approaches,  criteria  and 
outcomes  of  existing  taxonomies  for  environmentally  sustainable  investments  developed  by 
public authorities.  

-  The  report  on  sustainability-related  disclosures  will provide  a  comprehensive  and  holistic 
(i.e. ESG and double materiality) comparison of disclosure requirements across jurisdictions for 
companies  (including  banks),  asset  managers  and  institutional  investors  and  will  identify 
similarities and differences in their approaches and outcomes.  

35  Hong  Kong  Special  Administrative  Region  of  the  People’s  Republic  of  China  (Hong  Kong  SAR  of  PRC),  Indonesia, 
Japan, New Zealand, Norway, Senegal, Singapore, Switzerland and the United Kingdom also joined the IPSF. Together, the 
17 members of the IPSF represent 55% of greenhouse gas emissions, 50% of the world population and 55% of global GDP. 
36 The IPSF has 12 observers: the Coalition of finance ministers for climate actions, the European Bank for Reconstruction 
and Development (EBRD), the European Investment Bank (EIB), the European Development Finance Institutions (EDFI), 
the International  Financial  Reporting  Standards  Foundation (IFRS), the International Monetary Fund (IMF),  the Network 
for  Greening  the  Financial  System  (NGFS),  the  International  Organisation  of  Securities  Commissions  (IOSCO),  the 
Organisation  for  Economic  Co-operation  and  Development  (OECD),  the  United  Nations  Development  Programme 
(UNDP), the United Nations Environment Programme (UNEP), and the World Bank Group. 

9 

 
 
                                                 
-  The  annual  report will  provide  an  overview  of  the  activities  of  the IPSF  for  the  preceding 

year.  

Alongside  the  IPSF,  the  Commission  continues  to  play  an  important  role  in  other  international 
forums. To  promote  the  EU  sustainable  finance  agenda,  the  Commission  actively  participates  in 
different international work-streams:  

-  The G20 and its Sustainable Finance Working Group and the G7 Finance Track; 
-  The  Financial  Stability  Board  (FSB)  work-stream  on  Climate  Disclosures  and  the  working 

group on climate risk; 

-  The Basel Committee on Banking Supervision (BCBS) Task Force on Climate-related Financial 

Risks; 

-  The Coalition of Finance Ministers for Climate Action across the different Helsinki Principles. 

EU action on sustainable finance, both domestically and internationally, will also support the objectives 
of the upcoming United Nations Climate Change Conference (COP26) in November 2021.  

10 

 
 
 
Annex I. Stocktake of the 2018 Action Plan implementation 

Action 1: Establishing a classification system for sustainable activities (EU Taxonomy)  

1.1. Subject to the outcome of its impact assessment, the Commission will table a legislative proposal 
in  Q2  2018  that  will  ensure  the  progressive  development  of  an  EU  taxonomy  for  climate  change, 
environmentally and socially sustainable activities. 

On  24  May  2018,  the  Commission  published  a  legislative  proposal  for  a  Regulation  on  the 
establishment  of  a  framework  to  facilitate  sustainable  investment,  creating  a  unified  EU 
classification system of sustainable economic activities37. The Taxonomy Regulation was adopted on 
18 June 2020 and published in the Official Journal on 22 June 2020.  

The Taxonomy Regulation foresees three implementation steps: 

  An EU Taxonomy delegated act on activities contributing substantially to the two climate 
change  objectives38,  based  on  the  final  recommendations  by  the  Technical  Expert  Group  on 
Sustainable Finance (see below) and stakeholder inputs received from the 4-week ‘Have  your 
say’ feedback that closed on 18 December 2020. The delegated act was adopted on 4 June 2021 
and is now subject to a four plus two-month period of scrutiny by the co-legislators. If the co-
legislators do not object, the delegated act will enter into force on 1 January 2022. 

  A  delegated  act  on  activities  contributing  substantially  to  the  remaining  four 
environmental objectives39, to be adopted in the first half of 2022 and to apply from the start 
of 2023, based on the advice of the Platform on Sustainable Finance40. 

  A delegated act adopted on 6 July 2021 specifying the information companies subject to the 
non-financial  reporting directive (NFRD)41 will have to  disclose to  the public on how, and to 
what extent, their activities are associated with environmentally sustainable economic activities 
(taxonomy-aligned) under the EU Taxonomy42. 

37 For additional information on the EU Taxonomy, please see here.  
38 Article 9 of the EU Taxonomy Regulation specifies the following six climate and environmental objectives: (a) climate 
change mitigation, (b) climate change adaptation, (c) the sustainable use and protection of water and marine resources, (d) 
the  transition  to  a  circular  economy,  (e)  pollution  prevention  and  control,  and  (f)  the  protection  and  restoration  of 
biodiversity and ecosystems. 
39 Commission delegated regulation (EU), supplementing Regulation (EU) 2020/852 of the European Parliament and of the 
Council  by  establishing  the  technical  screening  criteria  for  determining  the  conditions  under  which  an  economic  activity 
qualifies  as  contributing  substantially  to  climate  change  mitigation  or  climate  change  adaptation  and  for  determining 
whether that economic activity causes no significant harm to any of the other environmental objectives, C/2021/2800 final, 
4.6.2021. 
40 Further information on the Platform on Sustainable Finance is available here.  
41 The Commission advanced a revision of the NFRD with the proposal for a Corporate Sustainability Reporting Directive 
(CSRD) on 21 April 2021, extending its scope of application. 
42  The  delegated  act  builds  on  the  technical  advice  by  the  European  Supervisory  Authorities  (ESMA,  EBA,  EIOPA) 
published 1 March 2021 and a call for feedback. 

11 

 
 
                                                 
The  Commission  announced  additional  steps  in  the  Communication  ‘Directing  finance  towards  the 
European Green Deal’ on 21 April 202143. 

The  Taxonomy  Regulation  also  requires  the  creation  of  the  Platform  on  Sustainable  Finance44. 
The  Platform  was  set  up  in  October  2020  as  a  Commission  expert  group.  It  has  been  mandated  to 
advise the Commission on future EU Taxonomy developments and sustainable finance policies more 
generally. This includes advising the Commission on the technical screening criteria for the remaining 
four  environmental  objectives,  updating  and  reviewing  existing  technical  screening  criteria  and 
exploring the merits of extending the EU Taxonomy framework to  other sustainability objectives and 
environmental performance levels.  

1.2.  Report  of  the  Commission  technical  expert  group  providing  a  taxonomy  for  climate  change 
mitigation activities.  

1.3.  Report  of  the  Commission  technical  expert  group  providing  a  taxonomy  for  climate  change 
adaptation and other environmental activities.  

The Technical Expert Group (TEG) on Sustainable Finance is the predecessor of the Platform on 
Sustainable Finance. Composed of 35 members, it was created in 2018  to assist the Commission in 
developing some of the actions of the Action Plan45. During its mandate (from July 2018 to September 
2020),  the  TEG  produced  a  report  on  the  EU taxonomy46,  with  recommendations  relating  to  the 
overarching  design  of  the  EU Taxonomy,  as  well  as  extensive  implementation  guidance  on  how 
companies  and  financial  institutions  can  use  and  disclose  against  the  EU  Taxonomy.  The  report  is 
supplemented  by  a  technical  annex47  containing  recommended  technical  screening  criteria  for  the 
climate objectives of the Taxonomy Regulation. 

Action 2: Standards and labels for green financial products 

2.1. Report of the Commission technical expert group on a standard for green bonds. 

The TEG published its final report on an EU Green Bond Standard48 and a usability guide49 on the 
use of the proposed standard and the set-up of a market-based registration scheme for external verifiers. 
On the basis of the TEG report, the Commission considered the feasibility and legal requirements for 
the development of a voluntary standard based on market best-practice, with the key requirement that 
the proceeds of the bond should be spent in line with the EU Taxonomy. 

On  6  July,  the  Commission  adopted  a  proposal  for  a  Regulation  on  a  standard  for  European  green 
bonds, which will constitute a voluntary standard. The proposed standard is aligned with the Taxonomy 
Regulation and market best practices on disclosures and external review requirements. It will cater to 

43 Communication from the Commission on “EU Taxonomy, Corporate Sustainability Reporting, Sustainability Preferences 
and Fiduciary Duties: Directing finance towards the European Green Deal”, COM(2021) 188 final, 21.4.2021.  
44 More details on the work and deliverables of the Platform on Sustainable Finance is available here.  
45 More details on the deliverables of the Technical Expert Group are available here.  
46 Technical Expert Group on Sustainable Finance, Final report on the EU taxonomy, 9.3.2020, available here. 
47  Technical  Expert  Group  on  Sustainable  Finance,  Technical  annex  to  the  TEG  report  on  the  EU  taxonomy,  9.3.2020, 
available here. 
48 Technical Expert Group on Sustainable Finance, Report on EU green bond standard, 18.6.2019, available here. 
49 Technical Expert Group on Sustainable Finance, Usability guide on EU green bond standard, 9.3.2020, available here. 

12 

 
                                                 
issuers  who  are  transitioning  towards  taxonomy-aligned  economic  activities,  or  whose  economic 
activities are already taxonomy-aligned. The proposal also includes a regime for ESMA to register and 
supervise those companies that wish to provide review services for European green bonds.  

2.2. Commission delegated act on the content of the prospectus for green bond issuances. 

The Commission has not yet addressed this. It is explored in the Strategy. 

2.3. Assessment of applying the EU Ecolabel to retail financial products. 

In 2018, the Commission concluded that the EU Ecolabel Regulation (66/2010) can include retail 
financial  products.  In  autumn  2018,  the  Joint  Research  Centre  (JRC)  was  mandated  to  provide 
technical support in the development of the criteria. It consequently undertook research and organised 
several rounds of consultations. 

The work on the EU Ecolabel for retail financial products is ongoing and will be adopted in 2022. 

Action 3: Fostering investments in sustainable projects 

Building  on  the  ongoing  efforts  to  reinforce  advisory  capacity,  including  for  developing  sustainable 
infrastructure projects, the Commission will take further measures that will improve the efficiency and 
impact of instruments aiming at sustainable investment support in the EU and in partner countries. 

To further support investments in sustainable projects, the Commission proposed the specific use 
of  the  InvestEU  Programme  under  the  Multiannual  Financial  Framework  (MFF)  2021-2027, 
which was adopted and published on 24 March 202150. The aim of the InvestEU Programme is to bring 
together  the  multitude  of  EU  financial  instruments  under  the  previous  MFF  2014-2020  to  bolster 
future-oriented investments across the European  Union over the period 2021-2027. Part of its budget 
was frontloaded to support companies in the COVID-19 recovery period. It will help mobilising private 
investments for the EU’s policy priorities, such as the European Green Deal and the digital transition. 

The  InvestEU  Programme  consists  of  the  InvestEU  Fund,  the  InvestEU  Advisory  Hub  and  the 
InvestEU  Portal.  These  components  represent  tools  to  provide  funding,  technical  support  and 
assistance. They aim to bring together investors and project promoters to support the four policy areas 
of  the  Programme:  (i)  sustainable  infrastructure;  (ii)  research,  innovation  and  digitisation;  (iii)  small 
and medium-sized businesses; and (iv) social investment and skills. 

The  InvestEU  Fund  financed  from  the  EU  budget  and  NextGenerationEU  will  provide  a  budgetary 
guarantee  of  €26  billion,  which  is  expected  to  trigger  investment  on  the  ground  estimated  at  around 
€370  billion  over  the  next  7  to  10  years.  In  line  with  the  InvestEU  climate  target,  30%  of  the 
investment mobilised (around €110 billion) should contribute to meet EU climate goals. In parallel, the 
InvestEU Fund is expected to mobilise investments related to natural capital and circular economy. 

A  dedicated  Just  Transition  Scheme  will  also  be  set  up  under  InvestEU  to  generate  additional 
investment that will benefit Just Transition territories (i.e. those most affected by the socio-economic 

50 Regulation (EU) 2021/523 of the European Parliament and of the Council of 24 March 2021 establishing the InvestEU 
Programme and amending Regulation (EU) 2015/1017, OJ L 107, 26.3.2021, p. 30.  

13 

 
 
                                                 
consequences  of  the  green  transition).  This  will  complement  the  Just  Transition  Fund  and  the  public 
sector loan facility. 

The Commission will organise a Sustainable Investment Summit ahead of the COP26. It will include 
all relevant stakeholders and take stock of progress across the different EU initiatives, included in the 
Sustainable Europe Investment Plan. 

Action 4: Incorporating sustainability in financial advice 

4.1. Subject to the results of its impact assessment, Commission delegated acts  (MiFID and IDD) on 
the suitability assessment. 

4.2. ESMA to include sustainability preferences as part of its guidelines on the suitability assessment. 

On 21 April 2021, the Commission adopted amendments to the delegated acts under the Markets in 
Financial Instruments Directive (MiFID II)51 and the Insurance Distribution Directive (IDD)52, which 
aim to integrate clients’ sustainability preferences into the existing suitability assessment53. Under the 
current  rules,  advisers  obtain  information  about  the  client's  investment  knowledge  and  experience, 
ability  to  bear  losses  and  risk  tolerance  (i.e.  they  conduct  a  suitability  assessment).  With  the 
amendments, advisers will also obtain information on the sustainability preferences of their clients.  

The  assessment  of  retail  investors’  sustainability  preferences  is  an  addition  to  the  suitability 
assessment.  The  sustainability  preferences  include  three  categories  of  products  that  are  material  in 
terms of sustainability: (i) products that are invested, at least to some extent, in Taxonomy-compliant 
activities  or,  (ii)  at  least  to  some  extent,  in  sustainable  investments  as  defined  in  SFDR,  or  (iii)  that 
consider  negative  externalities  of  investments  on  the  environment  or  society  (also  called  ‘principal 
adverse impacts on sustainability matters’). Following the adoption, amendments are under the scrutiny 
of  the  European  Parliament  and  the  Council  and  apply  12  months  after  publication  in  the  Official 
Journal. 

In  May  2018,  ESMA  published  its  Guidelines  on  certain  aspects  of  the  MiFID  II  suitability 
requirements54,  including  good  practice  for  firms  addressing  the  issue  of  sustainability  (pending 
changes to the legal framework).  

Action 5: EU Climate Benchmarks and Benchmarks’ ESG Disclosures  

5.1.  Commission  delegated  acts  on  the  transparency  of  the  methodology  of  benchmarks  and  on  the 
features of the benchmarks. 

51  Commission  Delegated  Regulation  (EU)  2017/565  of  25  April  2016  supplementing  Directive  2014/65/EU  of  the 
European  Parliament  and  of  the  Council  as  regards  organisational  requirements  and  operating  conditions  for  investment 
firms and defined terms for the purposes of that Directive, OJ L 87, 31.3.2017, p. 1 
52 Commission Delegated Regulation (EU) 2017/2359 of 21 September 2017 supplementing Directive (EU) 2016/97 of the 
European Parliament and of the Council with regard to information requirements and conduct of business rules applicable to 
the distribution of insurance-based investment products, OJ L 341, 20.12.2017, p. 8. 
53 This call for feedback was published together with the one on the amendments to delegated acts under UCITS, AIFM and 
Solvency II, to clarify the integration of sustainability risks in the fiduciary duty (see Action 9.3.). 
54  European  Securities  and  Markets  Authority,  Final  Report  on  Guidelines  on  certain  aspects  of  the  MiFID  II  suitability 
requirements, 28.5.2018, available here. 

14 

 
                                                 
5.2.  Subject  to  the  results  of  its  impact  assessment,  an  initiative  creating  a  designated  category  of 
benchmarks comprising low-carbon issuers.  

5.3.  Report  of  the  Commission's  technical  expert  group  on  the  design  and  methodology  of  the  low-
carbon benchmark. 

In  May 2018,  the  Commission  presented  a  proposal  for  a  regulation  amending  the  Benchmark 
Regulation55.  The  amendment  creates  a  new  category  of  EU  Climate  Benchmarks,  comprising  EU 
Climate Transition Benchmarks and EU Paris-aligned Benchmarks and underpinned by a methodology 
linked to the commitments laid down in the Paris Agreement. The Regulation also lays down a number 
of  ESG  disclosure  requirements  for  benchmark  administrators,  incorporating  the  TEG  report  of 
September 2019. The Regulation amending the Benchmark Regulation56 was adopted by co-legislators 
and published in the Official Journal on 9 December 2019. It entered into application on 30 April 2020.  

The Regulation envisages three delegated acts to be adopted by the Commission to define minimum 
standards.  This  includes  sustainability  criteria  for  a  benchmark  to  be  labelled  as  an  EU  Climate 
Transition Benchmark or EU Paris-aligned Benchmark. It also covers the ESG disclosure requirements 
for the benchmarks statement and the benchmark methodology of benchmarks provided in accordance 
with  the  BMR  (with  the  exception  of  interest  rate,  foreign  exchange  and,  for  the  methodology,  also 
commodity benchmarks). The Technical Expert Group published a report on climate benchmarks and 
benchmarks’ ESG disclosures57, followed by a complementary handbook58 on climate benchmarks and 
benchmarks’  ESG  disclosures,  to  clarify  the  recommendations  contained  in  the  final  report.  On  this 
basis,  the  Commission  prepared  the  delegated  acts59  that  entered  into  application  on  23  December 
2020. 

Looking forward, the Climate Benchmark Regulation requires that the Commission: 

- 

review  the  minimum  standards  for  EU  Climate  Transition  Benchmarks  and  for  EU  Paris-aligned 
Benchmarks to ensure consistency with the EU Taxonomy, by 31 December 2022; and 

-  present a report to the European Parliament and to the Council on the impact of this regulation and 
the  feasibility  of  an  ‘ESG  benchmark’  (broader  than  the  current  climate  approach)  before  31 
December 2022. 

55 Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2016/1011 on low 
carbon benchmarks and positive carbon impact benchmarks, COM/2018/355 final, 24.5.2018.  
56 Regulation (EU) 2019/2089 of the European Parliament and of the Council of 27 November 2019 amending Regulation 
(EU)  2016/1011  as  regards  EU  Climate  Transition  Benchmarks,  EU  Paris-aligned  Benchmarks  and  sustainability-related 
disclosures for benchmarks, PE/90/2019/REV/1, OJ L 317, 9.12.2019, p. 17.  
57  Technical  Expert  Group  on  Sustainable  Finance,  Interim  report  on  EU  climate  benchmarks  and  benchmarks’  ESG 
disclosures, 18.6.2019, available here. 
58 Technical Expert Group on Sustainable Finance, Handbook of climate transition benchmarks, Paris-aligned benchmarks 
and benchmarks’ ESG disclosures, 20.12.2019, available here. 
59  Commission  Delegated  Regulation  (EU)  2020/1816  of  17  July  2020  supplementing  Regulation  (EU)  2016/1011  of the 
European  Parliament  and  of  the  Council  as  regards  the  explanation  in  the  benchmark  statement  of  how  environmental, 
social and governance factors are reflected in each benchmark provided and published (OJ L 406, 3.12.2020), Commission 
Delegated  Regulation  (EU)  2020/1817  of  17  July  2020  supplementing  Regulation  (EU)  2016/1011  of  the  European 
Parliament  and  of  the  Council  as  regards  the  minimum  content  of  the  explanation  on  how  environmental,  social  and 
governance  factors  are  reflected  in  the  benchmark  methodology  (OJ  L  406,  3.12.2020,  p.  12),  Commission  Delegated 
Regulation (EU) 2020/1818 of 17 July 2020 supplementing Regulation (EU) 2016/1011 of the European Parliament and of 
the Council as regards minimum standards for EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks (OJ L 
406, 3.12.2020, p. 17). 

15 

 
                                                 
Action 6: Better integrating sustainability in ratings and research 

6.1. Commission services report on progress made on the actions involving credit rating agencies. 

6.2. ESMA to assess current practices in the credit rating market; ESMA to include ESG information in 
its guidelines on disclosure for credit rating agencies. 

ESMA  communicated  its  advice  on  the  current  practice  around  sustainability  considerations 
within  the  credit  rating  market  in  July  201960. ESMA  concluded  that credit  rating  agencies  are 
considering  environmental,  social  and  governance  factors  in  their  credit  ratings, according  to  the 
importance  assigned  to those factors  by  credit  rating  agencies’  methodologies.  ESMA  also concluded 
that it is important to strengthen disclosure on how ESG factors are being considered in credit ratings.  

As  a  first  step,  ESMA  updated  its  guidelines  on  disclosure  requirements  for  credit  ratings  in 
July 201961  and  has  started  checking  how  credit  rating  agencies  apply  these  new  guidelines  in 
April 2020,  when  they  entered  into  force.  The impact of  the  guidelines on  how  credit  rating  agencies 
disclose information on sustainability considerations in credit ratings is being currently assessed.  

6.3. Study on sustainability ratings and research. 

In December 2019, the Commission launched a study on sustainability-related ratings, data and 
research. The aim was to take stock of how the market is functioning and to provide an inventory and 
classification of the types of products and services that are offered. It identified the main players and 
provided information on data sourcing. The objectives of the study were also to look into the level of 
transparency of methodologies and potential shortcomings in the market.  

The Study on Sustainability-related ratings, data and research was published in January 202162. 
The  study  identified  a  number  of  issues  pertaining  to  the  functioning  of  the  market  of  ESG  ratings 
providers. It revealed issues in transparency around data sourcing and methodologies, as only few firms 
disclose the underlying indicators or the actual weights. The study also highlighted issues in terms of 
timeliness, accuracy and reliability of some of ESG ratings. Another issue identified related to potential 
biases based on the size and location of companies. Finally, it highlighted potential conflicts of interest 
associated  with  certain  aspects  of  their  work,  including  where  providers  both  assess  companies  and 
offer paid advisory services or charge companies to see their own reports. 

Action 7: Disclosures by financial market participants 

Subject to the results of its impact assessment, Commission legislative proposal to clarify institutional 
investors' and asset managers' duties on sustainability and to increase transparency of end-investors, 
including transparency on their strategy and climate-related exposures. 

In  May  2018,  the  Commission  published  a  proposal  for  a  Regulation  on  disclosures  relating  to 
sustainable investments and sustainability risks and amending the Institutions for Occupational 

60  European  Securities  and  Markets  Authority,  Technical  advice  to  the  European  Commission  on  sustainability 
considerations in the credit rating market, ESMA 33-9-321, 18.7.2019. 
61  European  Securities  and  Markets  Authority,  Final  report  on  guidelines  on  disclosure  requirements  applicable  to  credit 
ratings, ESMA33-9-320, 18.7.2019. 
62  European  Commission  and  Environmental  Resources  Management,  Study  on  sustainability-related  ratings,  data  and 
research, 6.1.2021, available here. 

16 

 
                                                 
Retirement  Provision  (IORP  )  Directive.  On  9  December  2019,  the  Regulation  on  sustainability-
related disclosures in the financial services sector (SFDR) was published in the Official Journal63. The 
SFDR  applies,  with  certain  exceptions,  as  of  10  March  2021.  This  regulation  foresees  three  separate 
areas of disclosures: 

  On sustainability risks (Articles 3 and 6): Disclosure requirements for all financial products 
on sustainability risk policies, and on how sustainability risks are integrated in the investment 
decisions/advice (as part of their duties towards investors). 

  On  adverse  impact  (Articles  4  and  7):  Requirement  for  financial  market  participants  to 
disclose how they consider principal adverse impacts of investment decisions on sustainability 
factors, i.e. negative externalities of investments caused to environment and society. The rules 
distinguish between disclosures at entity and financial products levels. 

  By  financial  products  with  certain  sustainability-related  ambition  (Articles  8,  9,  10  and 
11):  Disclosure  requirements  for  financial  products  with  sustainable  investment  as  their 
objective (often referred to as ‘dark green’ financial products) and for financial products with 
environmental and social characteristics (often refereed as to  ‘light  green’ financial products). 
They  have  to  prove,  via  disclosures,  their  sustainable  investment  objective/characteristics  and 
the related sustainability related ‘positive’ impacts. 

The  SFDR  empowers  the  European  Supervisory  Authorities  (ESAs)  to  jointly  prepare  seven 
draft Regulatory Technical Standards (RTS) (Articles 2a, 4(6) and (7), 8(3), 9(5), 10(2) and 11(4)), 
which were delivered to the Commission in February 202164. 

In addition, the Taxonomy Regulation empowers the three ESAs  -  by amending the SFDR  - to 
jointly  develop further RTS on ‘Taxonomy-related product disclosures’. On 17 March 2021, the 
ESAs published a consultation paper seeking input on draft RTS for disclosures of financial products 
investing in economic activities that contribute to an environmental investment objective. The closing 
date for responses to the consultation is 12 May 202165.  

Action 8: Sustainability in prudential requirements 

8.1.  Work towards  incorporating climate risks into  institutions’ risk management  policies and on the 
potential calibration of banks’ capital requirements in the Capital Requirement Regulation (CRR) and 
Directive  (CRD)  to  take  into  account  climate  change-related  risks  while  safeguarding  financial 
stability and ensuring coherence with the EU Taxonomy.  

In the context of the last banking package (CRR II/CRD V) adopted in May 2019, co-legislators 
agreed on three actions dedicated to sustainable finance:  

  A  requirement  for  large,  listed  institutions  to  disclose  ESG  risks  as  from  June  2022  (Article 

434a and 449a of the CRR), with first disclosure reference date as of 31 December 2022; 

63  Regulation  (EU)  2019/2088  of  the  European  Parliament  and  of  the  Council  of  27  November  2019  on  sustainability‐
related disclosures in the financial services sector, OJ L 317, 9.12.2019.  
64  Joint  Committee  of  the  European  Supervisory  Authorities,  Final  report  on  draft  Regulatory  Technical  Standards  with 
regard to the content, methodologies and presentation of disclosures pursuant to Article 2a(3), Article 4(6) and (7), Article 
8(3), Article 9(5), Article 10(2) and Article 11(4) of Regulation (EU) 2019/2088, JC 2021 03, 2.2.2021. 
65 For more information about the joint consultation on taxonomy-related sustainability disclosures and its results, see here. 

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  A  mandate  for  the  EBA  to  assess  the  potential  inclusion  of  environmental,  social  and 
governance (ESG) risks in the supervisory review and evaluation process (SREP) and report 
on its findings to the Commission by June 2021 (Article 98(8) of the CRD); and 

  A  mandate  for  the  EBA  to  assess  whether  a  dedicated  prudential  treatment  of  exposures 
related  to  assets  or  activities  associated  substantially  with  environmental  and/or  social 
objectives would be justified by June 2025 (Article 501c of the CRR)66. 

For the first  action, the  EBA has  consulted on technical standards for prudential  disclosures on  ESG 
risks  by  large  listed  institutions,  including  proposals  on  quantitative  information  on  climate  related 
risks  and  risk  mitigating  actions,  and  on  qualitative  information  on  the  broader  scope  of  E,  S  and  G 
related risks. The EBA plans to submit the technical standards to the Commission by the end of 2021. 
The  EBA  has  developed  these  proposals  in  parallel  with  the  advice  to  the  Commission  on  KPIs  and 
methodology for disclosure by banks and investment firms of disclosure of information on taxonomy-
aligned activities under Article 8 of the Taxonomy Regulation. 

For  the  second  action,  in  its  report  published  on  23  June  202167,  the  EBA  provides  institutions  with 
common  definitions  of  ESG  risks  and  their  transmission  channels  and  identifies  evaluation  methods 
that are needed for effective risk management. The EBA also recommends integrating ESG risks into 
business strategies, governance and risk management as well as supervision in a timely manner.  

For the third  action, considering the complexity  and potential impact  of this  work, the EBA plans to 
conduct  this  assessment  in  two  phases,  by  firstly  publishing  a  discussion  paper  and  then  considering 
feedback received to prepare the final report. 

A study on the development of tools and mechanisms for the integration of ESG factors into the 
EU banking prudential framework and into banks’ business strategies and investment policies’ was 
also  launched on the basis  of the funds provided by the European Parliament. An  interim report  was 
published on 14 December 202068. The analysis remains ongoing and the document published reflects 
the progress of the work as at submission date.  

8.2.  The  Commission  will  invite  the  European  Insurance  and  Occupational  Pensions  Authority 
(EIOPA) to assess the impact of prudential rules for insurance companies on sustainable investment.  

EIOPA’s opinion of September 2019 on Sustainability within Solvency II  69 concluded that there is 
not sufficient evidence to justify changes to capital requirements neither for decreases for sustainable 
investment  nor  for  increases  for  investments  in  fossil  fuel-dependent  sectors.  However,  EIOPA 
underlined the importance of qualitative assessments and scenario analyses to check the plausibility of 
quantitative valuations and capital requirements. On this topic, EIOPA published a separate opinion70 

66 More details on the role of the EBA are available here. 
67 European Banking Authority, Report on management and supervision of ESG risks for credit institutions and investment 
firms EBA/REP/2021/18, 23.6.2021, available here.  
68  BlackRock and  Financial  Markets  Advisory  (FMA),  Interim  Study  on  ‘Development  of  tools  and  mechanisms  for  the 
integration  of  environmental,  social  and  governance  (ESG)  factors  into  the  EU  banking  prudential  framework  and  into 
banks' business strategies and investment policies’, December 2020, available here. 
69  European  Insurance  and  Occupational  Pensions  Authority,  Opinion  on  sustainability  within  Solvency  II,  EIOPA-BoS-
19/241 30.9.2019. 
70 European Insurance and Occupational Pensions Authority,  Opinion on the supervision of the use of climate change risk 
scenarios in ORSA, EIOPA-BoS-21-127, 19.4.2021. 

18 

 
                                                 
  
and ran a consultation for that purpose71. These opinions will feed into the review of the Solvency II 
Directive, foreseen for Q3 2021.  

Action 9: Strengthening sustainability disclosures by corporates 

9.1. Publication of conclusions of the fitness check on public corporate reporting. This will inform any 
future legislative action by the Commission. 

The  Commission  published  a  fitness  check  of  EU  legislation  on  public  corporate  reporting  in 
April 202172. The results showed that information reported by companies under the provisions of the 
existing NFRD does not meet the needs of intended users, and that the current framework also leads to 
confusion and unnecessary costs for reporting companies.  

In  the  Communication  on  the  European  Green  Deal,  published  on  11  December  2019,  the 
Commission committed to review the NFRD as part of the strategy to strengthen the foundations for 
sustainable investment. From February to June 2020, the Commission carried out a public consultation 
on the review of the NFRD73.  

Building  on  the  results  of  the  consultation  and  the  feedback  received  from  stakeholders,  on  21 
April  2021  the  Commission  adopted  a  legislative  proposal  for  a  Corporate  Sustainability 
Reporting Directive (CSRD), to amend the rules introduced by the NFRD. This proposal aims to 
create  a  set  of  rules  that  will  –  over  time  –  bring  sustainability  reporting  on  a  par  with  financial 
reporting. It will also extend the EU’s sustainability reporting requirements to all large companies and 
all listed companies. The proposal is currently being considered by the co-legislators. 

9.2. Revision of the guidelines on non-financial information as regards climate-related information 

In January 2019, the TEG published a report on corporate disclosure of climate-related information74. 
Based  on  this  report,  in  June  2019,  the  Commission  published  updated  guidelines  on  reporting 
climate-related information75, which supplement the existing guidelines on non-financial reporting. 

9.3. Subject to the result of its impact assessment, proposal requiring asset managers and institutional 
investors  to  disclose  how  they  consider  sustainability  factors  in  their  investment  decision  making 
process (as part of the proposal foreseen under action 7). 

On 8 June 2020, the Commission published a call for feedback, which was open until 6 July 2020 on 
amendments  to  several  delegated  acts.  UCITS,  AIFM,  Solvency  II  and  MiFID  II  delegated  acts 
were  amended  to  clarify  investors’  fiduciary  duty,  integrating  sustainability  risks  considerations  – 
i.e. risks that have impact on the value of the portfolio, as defined in the SFDR. The texts were based 

71 For further information about the consultation on the draft opinion on the supervision of the use of climate change risk 
scenarios in ORSA, see here.  
72  Commission  staff  working  document,  ‘Fitness  Check  on  the  EU  framework  for  public  reporting  by  companies’, 
accompanying  the  document  ‘Report  from  the  Commission  to  the  European  Parliament,  the  Council  and  the  European 
Economic  and  Social  Committee  on  the  review  clauses  in  Directives  2013/34/EU,  2014/95/EU,  and  2013/50/EU’, 
SWD(2021) 81 final, 21.4.2021.  
73 For further information on the consultation, see here. 
74 Technical Expert Group on Sustainable Finance, final report on climate-related disclosures, 10.1.2019, available here. 
75 Communication from the Commission, ‘Guidelines on non-financial reporting: Supplement on reporting climate-related 
information’, C/2019/4490, OJ C 209, 20.6.2019. 

19 

 
                                                 
on  the  technical  advice submitted  by  ESMA76  and  EIOPA77  in  May  2019.  On  21  April  2021,  the 
Commission  adopted  the  amendments,  which  cover  organisational  requirements,  operating 
conditions, and risk management.   

9.4. By Q3 2018, a  European Corporate Reporting Lab will  be established as part of  the European 
Financial  Reporting  Advisory  Group  (EFRAG),  to  promote  innovation  and  the  development  of  best 
practices  in  corporate  reporting,  such  as  environmental  accounting.  In  this  forum,  companies  and 
investors can share best practices on sustainability reporting, such as the climate-related disclosure in 
line with the TCFD's recommendations. 

The European Corporate Reporting Lab was launched by EFRAG in November 201878. The first 
project, on climate-related reporting, published its report in February 202079. The Lab also established 
a  task  force  to  respond  to  the  Commission’s  request  for  preparatory  work  on  the  development  of 
possible  EU  non-financial  reporting  standards.  The  task  force  published  its  recommendations  in 
February 202180. In addition, a Lab project on business model and risk reporting is currently ongoing.  

9.5. The Commission will request EFRAG, where appropriate, to assess the impact of new or revised 
IFRSs  on  sustainable  investments.  The  Commission  will  also  ask  EFRAG  to  explore  potential 
alternative  accounting  treatments  to  fair  value  measurement  for  long-term  investment  portfolios  of 
equity  and  equity-type  instruments.  In  Q4  2018,  the  Commission  will  report,  taking  into  account 
EFRAG current work, on the impact of IFRS 9 on long-term investments and explore improvements to 
the standard for the treatment of equity instruments. 

EFRAG responded to two Commission calls for technical advice on 28 November 2018 and on 30 
January  2020  respectively.  EFRAG’s  final  response  included  a  recommendation  to  request  the 
International  Accounting  Standards  Board  (IASB)  reconsider  the  re-introduction  of  recycling  (of 
profits)  for  equity  instruments  measured  at  Fair  Value  through  Other  Comprehensive  Income 
(FVOCI)81. Based on EFRAG’s recommendation, Executive Vice-President Valdis Dombrovskis sent a 
letter to the IASB on 13 March 2020. 

On 30 April 2020, the IASB responded, suggesting that it will start its post-implementation review of 
IFRS  9  Financial  Instruments  with  ‘Classification  and  Measurement’.  This  would  allow  for  the 
identification of possible ways forward to address the non-recycling issue at an early stage, if needed. 
In  line  with  its  response  to  EVP  Dombrovskis  in  April,  the  IASB  has  decided  to  start  the  post-

76 European Securities and Markets Authority, Technical advice on integrating sustainability risks and factors in the UCITS 
Directive and AIFMD, ESMA34-45-688, 30.4.2019. 
77 European Insurance and Occupational Pensions Authority, Technical Advice on the integration of sustainability risks and 
factors in the delegated acts under Solvency II and IDD, EIOPA-BoS-19/172, 30.4.2019. 
78 For further information about the European Corporate Reporting Lab, see here. 
79 Project Task Force on Climate-related Reporting,  ‘How to improve climate-related reporting  - A summary of practices 
from Europe and beyond’, February 2020, available here. 
80 European Corporate Reporting Lab, ‘Proposals for a relevant and dynamic EU sustainability reporting standard-setting’, 
February 2021, available here. 
81 European Financial Reporting Advisory Group, Response letter to the European Commission on a request for technical 
advice on alternative accounting treatments for long-term equity investments, available here. 

20 

 
                                                 
implementation Review of IFRS 982, which also includes the long-term investment issue of recycling of 
equity instruments measured at FVOCI.  

This  exchange would be followed by the  final  output in  terms  of a possible revised  IFRS 9 after the 
IASB Post-implementation Review. 

9.6. Within the fitness check of EU legislation on public corporate reporting, the Commission will also 
evaluate  relevant  aspects  of  the  International  Accounting  Standards  Regulation.  It  will  in  particular 
explore how the adoption process of IFRSs can allow for specific adjustments to standards where they 
are  not  conducive  to  the  European  public  good,  e.g.  where  the  standards  could  pose  an  obstacle  to 
long-term investment objectives. 

The International Accounting Standards Regulation (IAS Regulation) provides limited flexibility 
to  amend  standards  as  issued  by  the  IASB  in  case  a  standard  would  not  meet  the  technical 
endorsement criteria or not be conducive to the European public good. However, the overall conclusion 
of the fitness check is that introducing greater flexibility is not needed at this point. So far, the EU has 
been able to deal with such situations using the limited flexibility available within the confines of the 
IAS Regulation (the so-called ‘carve-out’ power and the ‘top-up’). The EU has only needed to do so 
sparingly on two occasions since 2003 to cover very limited elements of two standards. This suggests 
that the endorsement procedure foreseen in the current legal framework provides sufficient flexibility 
in most cases.  

Action 10: Fostering sustainable corporate governance & promoting long-termism 

10.1.  Assessment  of  possible  ways  to  promote  corporate  governance  more  conducive  to  sustainable 
finance. 

On  20  February  2020,  the  Commission  published  a  study  on  due  diligence  requirements  through  the 
supply  chain83.  This  study  focuses  on  due  diligence  requirements  to  identify,  prevent,  mitigate  and 
account for abuses of human rights, including the rights of the child and fundamental freedoms, serious 
bodily injury or health risks, and environmental damage. 

On  29  July  2020,  the  Commission  published  a  study  on  directors’  duties  and  sustainable  corporate 
governance84.  The  study  focuses  on  issues  contributing  to  ‘short-termism’  in  company  law  and 
corporate governance, which have been grouped around seven key problem drivers, covering aspects 
such as directors’ duties and their enforcement, board remuneration and composition, sustainability in 
the business strategy, and stakeholder involvement. The study suggests that a possible future EU action 
in the area of company law and corporate governance should pursue the general objective of fostering 
more  sustainable  corporate  governance  and  contributing  to  more  accountability  for  companies' 
sustainable value creation.  

The  Commission  has  launched  an  initiative  aiming  to  improve  the  EU  regulatory  framework  on 

82 For further information about the Post-implementation Review of IFRS 9 - Classification and Measurement, see here. 
83 British Institute of International and Comparative Law, Civic Consulting, European Commission (Directorate-General for 
Justice and Consumers), London School of Economics and Political Science, ‘Study on due diligence requirements through 
the supply chain’, 20.2.2020, available here. 
84 European Commission (Directorate-General for Justice and Consumers), Ernst&Young, ‘Study on directors’ duties and 
sustainable corporate governance’, 29.7.2020, available here. 

21 

 
                                                 
company  law  and  corporate  governance.  The  Commission  carried  out  a  public  consultation  from  26 
October 2020 to 8 February 202185. It will adopt a proposal in 2021. 

10.2. ESAs to collect evidence of undue short-term pressure from capital markets on corporations and 
consider further steps based on such evidence. 

On 1 February 2019, the Commission requested advice from ESMA, EBA and EIOPA on undue short-
term  pressure  from  the  financial  sector  on  corporations86.  They  published  their  findings  in 
December 2019,  recommending  to  strengthen  disclosure  of  ESG  factors  to  facilitate  institutional 
investor engagement (EBA87, EIOPA88, ESMA89).  

85 For further information about the consultation, see here. 
86  Cover  letter  to  the  call  for  advice  to  the  European  Supervisory  Authorities  to  collect  evidence  of  undue  short-term 
pressure from the financial sector on corporations, 1.2.2019, available here. 
87 European Banking Authority, Report on undue short-term pressure from the financial sector on corporations, 18.12.2019. 
88 European Insurance and Occupational Pensions Authority, ‘Potential undue short-term pressure from financial markets on 
corporates: Investigation on European insurance and occupational pension sectors’, EIOPA-BOS-19-537, 18.12.2019. 
89  European  Securities  and  Markets  Authority,  Report  on  undue  short-term  pressure  on  corporations,  ESMA30-22-762, 
18.12.2019. 

22