Disclosure and taxonomy regulation

Regulation 2020/852 Disclosure sets 6 environmental criteria (art. 9):

Climate change mitigation

Climate change adaptation

Sustainable protection of water and marine resources

Transition to a circular economy

Pollution prevention and control

Protection and restoration of biodiversity and ecosystems

In order to be in line with the taxonomy, an economic sector must meet three inter-linked conditions :

  • \Economic activity contributes substantially to one of the six environmental criteria presented above
  • \Without significantly harming other environmental objectives
  • \By complying with minimum social guarantees

The eligibility of an economic sector for the taxonomy of the European Union must additionally complete three standards * :

  • \The activity is already low carbon
  • \The activity contributes to the transition to a net zero emission economy by 2050
  • \The activity allows other activities to reduce their CO2 emissions

* These principles will be confirmed after the drafting of the acts delegated to Regulation 2020/852 Disclosure

Nuclear energy remains debatable and is surprisingly excluded from the above environmental criteria of the European Union taxonomy.

While zero production of direct carbon emissions and cleanliness of the used water provide supportive arguments for the sector, the issue of radioactive waste has not been resolved.

After the full implementation of the EU taxonomy, it will be easy to determine whether a company falls within its scope or if it is excluded :

  • \Companies will be required to publish their non-financial information (Non Financial Reporting Directive)
  • \The companies concerned will be required to publish new indicators aligned with the taxonomy in their declaration of extra-financial performance (DPEF)

Principles of transparency and harmonisation

Regulation 2019/2088 published in the EU Official Gazette on 27 November 2019 sets a framework for sustainability in the finance sector (text applicable from 10 March 2021). It sets the Disclosure regulation (SFDR *).

* Sustainable Financial Disclosure Regulation 

This regulation was put in place for the harmonisation of rules in sustainable finance. This should make it easier for customers to compare so-called socially responsible financial products. The regulation additionally proposes to set a definition for “Socially Responsible Investment”.

The activities concerned by SFDR are :

  • \Investment firms providing a portfolio management service on behalf of third parties
  • \AIF managers (Alternative Investment Funds)
  • \Management companies
  • \Investment advisory (Conseiller en Investissement Financier, Société de Gestion de Portefeuille*)

* Financial investment advisor; Portfolio management company

Transparency obligation 

  • Remuneration transparency
  • Sustainability risk policy
  • Transparency of negative impacts on sustainability activities