The guidelines, along with three new reports on green finance, demonstrate the European Commission’s intent in respect of meeting its Paris Agreement targets.

By Paul A. Davies, Michael D. Green and Clément Pradille

On June 18, 2019, the European Commission (Commission) published new guidelines on corporate climate-related information reporting, as well as three new reports by the Technical Expert Group on Sustainable Finance (TEG), as part of the Commission’s Sustainable Finance Action Plan (Action Plan). The new guidelines provide companies with information and recommendations to support their approach to reporting the impact of their activities on climate change, and also how climate change impacts the business of those companies.

Understanding the Guidelines

The Commission published its guidelines on reporting climate change-related information (2019 Guidelines) under the Non-Financial Reporting Directive 2014/95/EU (Directive). The 2019 Guidelines are part of the Action Plan, which was published in March 2018 and aims to reorient capital toward sustainable investment, manage financial risks arising from climate change, and foster transparency and a long-term view in financial and economic activities.

The Commission considers company disclosure of clear and usable sustainability, and climate-related information, as critical to the success of the Action Plan. Without this information, formalizing the Commission’s proposed regulations on sustainable investment taxonomy, sustainability disclosures, and carbon-related benchmarks will prove difficult.

The 2019 Guidelines also incorporate reporting recommendations made by the Financial Stability Board’s Task Force on Climate-related Financial Disclosure (TCFD) encouraging financial institutions and non-financial companies to disclose information on climate-related risks and opportunities.

The Commission has stated that companies will benefit from better disclosure of climate-related information through:

  • Increased awareness and understanding of climate-related risks and opportunities
  • Improved risk management
  • More informed decision-making and strategic planning
  • More constructive dialogue with stakeholders (particularly investors and shareholders)
  • An enhanced corporate reputation
  • A more diverse investor base

The Commission recommends that companies read the 2019 Guidelines alongside the Directive, relevant national legislation, and its Non-Binding Guidelines on Non-Financial Reporting (2017 Guidelines).

The 2019 Guidelines, like the 2017 Guidelines, are non-binding, and companies may report climate-related information differently provided the legal requirements are met.

The TEG Reports

Together with the 2019 Guidelines, the Commission also published the following reports from TEG:


The first TEG report is a classification system (the Taxonomy) for environmentally sustainable economic activities that aims to provide practical guidance for policy makers, industry, and investors on how best to support and invest in economic activities that contribute to a climate-neutral economy. Capital markets can use the Taxonomy as a tool to identify and respond to investment opportunities that contribute to environmental policy objectives.

The Taxonomy presents a list of economic activities — across numerous industries including energy, transportation, agriculture, manufacturing, and real estate — that can make a substantial contribution to climate change mitigation. Enforcement legislation is still under negotiation, and is expected to be decided by year-end 2019.

EU Green Bond Standard

The second TEG report recommends clear and comparable criteria for issuing green bonds. The report makes several recommendations, three of which relate to the establishment of the EU Green Bond Standard (EU-GBS):

  • Create a voluntary EU-GBS to enhance the effectiveness, transparency, accountability, comparability, and credibility of the green bond market, and encourage issuers to issue bonds as “EU Green Bonds”.
  • Ensure the EU-GBS includes: (a) alignment of green projects with the EU Taxonomy; (b) a Green Bond Framework; (c) reporting; and (d) verification by accredited verifiers.
  • Encourage the set-up of a voluntary interim registration process for verifiers of EU Green Bonds for an estimated transition period of up to three years.

By linking the EU-GBS to the Taxonomy, issuers can determine which activities will be considered eligible to be designated as an EU Green Bond. The Commission expects this link to boost the green bond market, allowing an increase in sustainable and green investments.


The third TEG report outlines the creation of two types of climate benchmarks: the EU Climate Transition Benchmark and the EU Paris-aligned Benchmark. A climate benchmark is an investment benchmark that incorporates specific objectives related to greenhouse gas emissions and the transition to a low-carbon economy.

The TEG benchmarks aim to (a) allow comparability of climate benchmark methodologies, while retaining design flexibility; (b) provide investors with a tool aligned to their strategies; (c) increase transparency on investors’ impacts; and (d) disincentivize greenwashing. The report also defines minimum Environmental, Social and Governance (ESG) disclosure requirements applicable to all investment benchmarks and currently available indices except interest rate and currency benchmarks.


The publication of the 2019 Guidelines and TEG Reports is a large step forward for the Commission in relation to its Action Plan and its commitment to the Paris Agreement. The publications pave the way for the implementation of associated Directives, which will drive further change in the European financial sector, and constitute the largest modern geographical policy framework for environmental activities. This framework extends beyond the European Union — in particular the Taxonomy and Green Bond Standard is noted as being open to use by companies in the United States and China.

Latham & Watkins will continue to monitor developments in this area.

This post was prepared with the assistance of Martin Cassidy in the London office of Latham & Watkins.