EU GREEN TAXONOMY IN PRACTICE: WHITE PAPER 2023
Dr. Jane Thostrup Jagd, Director of Net Zero Finance at We Mean Business Coalition
The EU Green Taxonomy is currently being rolled out, and it aims to define which of a company’s activities are ‘green’, thereby making it easier for financial companies to funnel capital towards green companies/projects while minimizing their risks of greenwashing. The idea is a good one – but how is the implementation going in practice? We Mean Business Coalition has in this white paper sought greater insights into what the EU Green Taxonomy reporting practice is for both financial and non-financial companies. We have done so, because the legislation has been criticized for not being accurate, and at times not being relevant for those companies that are requested to report.
We have analyzed the 100 largest, listed EU companies’ Taxonomy reporting, both to see how they apply the new legislation at its current stage – it is not fully implemented yet – but also to investigate if the legislation could be better and more precisely defined. We have also analyzed whether the Taxonomy activities are relevant for the companies being asked to report.
From our analysis we find both good practice and things that need attention. We have identified areas of improvement for both non-financial companies and financial companies. We also find legislation that could be more precise and that could often be drastically simplified. In short, our findings reveal:
Financial and non-financial companies can do better in applying the regulations;
Regulators can do better in defining key terms in the legislation to minimize very different interpretations, and via simplifying the reporting requirements – hence increasing comparable and useful reporting;
Regulators can increase relevance by either developing significantly more taxonomy activities, or by narrowing the reporting burden to specific relevant sectors.
The good news is that all the companies’ reports that we looked at refer to the Taxonomy, and they publish information in the right reports. They even, to a large extent, get voluntary assurance, just as many companies already work with/issue Taxonomy labelled bonds. Given that the EU Green Taxonomy is not fully implemented yet, this is a positive sign, and it gives great hope that investment can flow into businesses that are leading the way on climate action in Europe, at the speed and scale necessary for halving global emissions by 2030. With adjustments to some of the practices by companies and revisions to the legislation, reporting can be made truly useful.
Download the We Mean Business Coalition White Paper to get further insights for both companies and legislators on how the framework and its output can be further improved.
Read our companion blog, providing background on the EU sustainable finance regulation landscape and discussing the findings of the report.