The sustainable finance classification system entered into force on 12 July 2020, providing a framework for other green initiatives.
On 12 July 2020, the EU’s regulation on the establishment of a framework to facilitate sustainable investment (the Taxonomy Regulation) entered into force, after several years of planning and deliberation. The EU Commission (the Commission) initially proposed an action plan on financing sustainable growth in March 2018. Action 1 of the plan called for the establishment of an EU classification system for sustainable activities (the Taxonomy). Subsequently, in May 2018, the Commission proposed the Taxonomy Regulation, as reported on in a previous blog post.
The Taxonomy Regulation entered into force 20 days after it was published in the Official Journal of the EU on 22 June 2020. The European Parliament had approved the text of the Taxonomy Regulation on 18 June 2020, having reached a political agreement on the Taxonomy Regulation on 18 December 2019.
The Commission is due to adopt the delegated acts on the first two climate-related objectives of the Taxonomy (climate change mitigation and climate change adaptation) by 31 December 2020, to ensure their full application by the end of 2021. A previous ELR blog post provides more information on the legal process of the Taxonomy, as well as commentary relating to the Taxonomy FAQs.
Several of the Commission’s sustainable finance initiatives will (or are anticipated to) link to the Taxonomy, including the Commission’s post-COVID-19 recovery fund and the forthcoming Green Bond Standard (the latter having been discussed in a recently published Commission consultation).
Latham & Watkins will continue to monitor developments in this area.
This post was written with the assistance of Emilie Cornelis in the London office of Latham & Watkins.