The European Commission (EC) has proposed a new package of measures that aim to build on and strengthen the foundations of the EU sustainable finance framework.

It stated that while many companies and investors have already begun their transition to a net-zero economy, they were also facing challenges with this transition, especially when it came to complying with new disclosure and reporting requirements.

Therefore, the EC has put forward the package to help ensure that the EU sustainable finance framework continued to support companies and the financial sector with the transition, while encouraging the private funding of transition products and technologies.

The package includes an update to the EU Taxonomy and new rules for environmental, social and governance (ESG) rating providers, which the commission said would increase transparency on the market for sustainable investments.

It also aims to make the sustainable finance framework easier to use, and the EC has developed a series of targeted measures and initiatives to enhance the usability of the rules and support stakeholders in their implementation.

The updated EU Taxonomy Delegated Acts have been approved in principle and will be send to the European Parliament and the Council for assessment, and are expected to apply from January 2024.

Meanwhile, the proposal for new rules on ESG rating providers will be discussed with the European Parliament and Council.

“We have the foundations of the sustainable finance framework in place,” commented Financial Services, Financial Stability and Capital Markets Union commissioner, Mairead McGuinness. “Now is time to build on them.

“Today we are taking steps to further develop the EU Taxonomy. And we are bringing more transparency and integrity to the market by introducing rules on the operations of ESG rating agencies.

“Enhancing the usability and coherence of the sustainable finance framework will be our key priority.

“We also need to reap the full potential of transition finance to ensure that all companies irrespective of their starting points can have adequate tools and support for their transition efforts towards sustainability.”

Principles for Responsible Investment head of EU policy, Elise Attal, added: “PRI welcomes the EC’s sustainable finance package. In particular, we support the dual focus on enhancing the usability and consistency of the sustainable finance framework, and ensuring a transition towards a sustainable and inclusive financial system, economy and wider society.

“PRI signatories need regulatory clarity and stability. Therefore, the Commission’s commitment to actively supporting implementation and ensuring that the tools and disclosures work in practice is an important signal.

“However, more needs to be done in future legislative reviews to achieve coherence and improve usability, while the global convergence of sustainable financial frameworks is also pursued. We welcome the Commission’s intention to intensify its efforts on this.

“Beyond coherence and usability, we also support the Commission’s intention to prioritise facilitating transition finance. Given the urgency and magnitude of sustainability issues we face, sustainable finance needs to flow faster and bridge the large private investment gaps to achieve the objectives of the European Green Deal, the Paris Agreement, and the UN Sustainable Development Goals.

“This Commission’s last sustainable finance package before the end of its current mandate, linking to the Taxonomy and ESG ratings, should support this transition by improving the ability of investors to make informed decisions regarding the sustainability of their investments and helping companies to better understand their sustainability performance.''

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