limite en - politico€¦ · ecomp.1.b limite en annex proposed legal drafting for key issues on...

14880/19 MP/jk 1

ECOMP.1.B LIMITE EN

Council of the European Union

Brussels, 6 December 2019 (OR. en) 14880/19 LIMITE EF 356 ECOFIN 1123 CODEC 1739 ENV 992 SUSTDEV 172

Interinstitutional File: 2018/0178 (COD)

NOTE

From: Presidency

To: Permanent Representatives Committee

No. Cion doc.: COM(2018) 353 final

Subject: Regulation of the European Parliament and of the Council on the establishment of a framework to facilitate sustainable investment (Regulation on Sustainable Finance - taxonomy)

- Revision of the mandate for negotiations with the European Parliament

I. INTRODUCTION

1. In March 2018, the Commission published its Action Plan 'Financing Sustainable Growth',

setting up an ambitious and comprehensive action plan strategy on sustainable finance. One of

the main objectives of that action plan is to reorient capital flows towards sustainable

investment to achieve sustainable and inclusive growth.

2. In this context, on 24 May 2018, the Commission submitted to the Council a package of

legislative proposals:

‒ Proposal for a Regulation of the European Parliament and of the Council on the

establishment of a framework to facilitate sustainable investment, also referred to as

"Taxonomy Regulation";

14880/19 MP/jk 2

ECOMP.1.B LIMITE EN

‒ Proposal for a Regulation of the European Parliament and of the Council on

disclosures relating to sustainable investments and sustainability risks and amending

Directive (EU) 2016/2341, also referred to as "Disclosure Regulation"; and

‒ Proposal for a Regulation of the European Parliament and of the Council amending

Regulation (EU) 2016/1011 on low carbon benchmarks and positive carbon impact

benchmarks, also referred to as "Benchmarks Regulation".

3. Political agreements have been reached with the European Parliament on Disclosure and

Benchmarks Regulations in March 2019.

4. On 28 March 2019, the European Parliament adopted a legislative resolution with its position

at first reading concerning the Taxonomy Regulation1. On 25 September 2019, COREPER

agreed the negotiating mandate with regard to the proposed Regulation2. Since agreement of

the mandate by COREPER, six trilogues have taken place.

5. At the 3 and 5 December 2019 trilogues, the Finnish Presidency and the European Parliament

reached an understanding "ad referendum" on the key issues in the Taxonomy Regulation,

subject to the revision of the negotiating mandate by COREPER and without prejudice to the

technical finalisation of the legal text as a whole at a later stage.

6. The key issues covered are briefly described below, with corresponding proposed legal

drafting set out in the corresponding paragraphs in the Annex.

1 Doc. 7759/19. 2 Doc. 12360/2/19 REV 2.

14880/19 MP/jk 3

ECOMP.1.B LIMITE EN

7. Considering that the establishment of a unified classification system for sustainable economic

activities is the most important and urgent action envisaged by the 2018 Sustainable Finance

Action Plan, reaching a political agreement on this file swiftly would contribute importantly

to one of the key objectives of the action plan to reorient capital flows towards sustainable

investment in order to achieve sustainable and inclusive growth.

II. RESULT OF THE 3-5 DECEMBER 2019 TRILOGUES

8. The result of the trilogues on the key issues is briefly explained below, with corresponding

proposed legal drafting, which is set out in the relevant paragraphs of the Annex.

A. Three main issues

(1) Scope

Material scope: The European Parliament's initial position departed from the concept of

binary taxonomy proposed by the Commission and supported by the Council, whereby the

scope of the Regulation would cover screening of all economic activities for degree of their

environmental sustainability. The understanding reached retains the binary concept of

taxonomy (possible extension to comprehensive taxonomy is addressed in the review clause),

but specifies further the link to the Disclosures Regulation (DR) in relation to taxonomy-

compliant products (products referred to in Article 9 of DR), to products that promote

environmental characteristics (products referred to in Article 9 of DR) and to other, so called

“mainstream" products. The understanding reached retains disclosure of compliance with

Taxonomy Regulation in relation to Article 9 products and a ‘mutatis mutandis’ application of

Article 9 for Article 8 products to the extent the financial product promotes ‘environmental

characteristics’. The understanding includes that for Article 8 products information to be

disclosed shall include very factual statements and for other than Article 9 or 8 products only

by a factual statement of not taking into account Taxonomy. The understanding furthermore

includes provisions for corresponding updates of regulatory technical standards already

provided for under DR.

14880/19 MP/jk 4

ECOMP.1.B LIMITE EN

The understanding retains the exclusion regarding certain tax incentive schemes to the extent

they existed prior to the entry into force of the Regulation,with The Council text, originally in

Article 4(1), was modified slightly and placed under Article 18..

Personal scope: The European Parliament intended to cover initially a broad array of legal

entities, including issuers. Since this was unacceptable for the Council, the understanding

includes a link between taxonomy-compliant financial products and company level disclosure,

by rendering mandatory for undertakings which are subject to the obligation to publish a non-

financial statement or a consolidated non-financial statement pursuant to Articles 19a or 29a

of Directive 2013/34/EU, to include their turnover, investment (CapEx) or expenditure

(OpEx) associated with the taxonomy-compliant economic activities.

Detailed proposed legal drafting for this element is set out in point 1 of the Annex.

(2) Climate neutrality

The European Parliament initially requested exclusions of power generation activities that use

solid fossil fuels, of activities, which contribute to carbon-intensive lock-in effects and of

activities, which produce non-renewable waste. The understanding between co-legislators

retains the exclusion for solid fossil fuels, but follows the Council's approach of not excluding

activities which produce non-renewable waste. The understanding maintains the application

of the principle of technological neutrality in the adoption of the technical screening criteria

and the concept of carbon/climate-neutral energy in line with the Council's position. In

addition, it also provides that when establishing technical screening criteria for transition

activities (Art 6), the Commission shall assess the potential contribution of all relevant

existing technologies. Moreover, the understanding also provides for regular review of

transition activities.

14880/19 MP/jk 5

ECOMP.1.B LIMITE EN

Proposed legal drafting for this element is set out in points 2 and 7 of the Annex.

(3) Governance

Commission proposal and the European Parliament position provide for adoption of technical

screening criteria, including quantitative and qualitative thresholds, to be adopted through

delegated acts. The Council's approach provided for the setting of specifically the

quantitative and qualitative thresholds through implementing acts to be adopted in the

framework of delegated acts. The Council's approach also provided for enhanced involvement

of Member States in elaboration of those criteria through a Member States Experts Group.

This is retained in the understanding. The combined use of delegated and implementing acts

was unacceptable by the European Parliament and the Commission. The understanding does

not retain implementing acts, but it has further enhanced the involvement of the Member

States through the establishment of the Member States Expert Group in accordance with the

principles and procedures laid down in the Inter-institutional Agreement of 13 April 2016 on

Better Law-Making.

Proposed legal drafting for this element is set out in point 3 of the Annex.

B. Other elements of the understanding

(4) Minimum safeguards

The main proposal of the Parliament regarding minimum safeguards concerned the

introduction of a further empowerment for the Commission to adopt delegated acts which

would specify the criteria to determine whether the safeguards under Article 13 are adhered

to. The Parliament accepted to apply in that context the principle of "do not significantly

harm" referred to in Article 2(17) of the DR and regulatory technical standards developed

under that Regulation, by way of a reference to the DR.

14880/19 MP/jk 6

ECOMP.1.B LIMITE EN


(5) Supervision

The Parliament was demanding introduction of new tasks for the European Supervisory

Agencies (ESAs). The Presidency defended the position of the Council and no changes in the

roles and supervisory powers of the ESAs or the National Competent Authorities (NCAs)

were made. The Supervision regime will be based on Article 15a and 15b in the Council's

mandate. A new sentence in the recital on supervision would be added. Supervision is also

covered in the review clause.

Proposed legal drafting for this element is set out in points 5 and 9 of the Annex.

(6) Key environmental concepts

Proposed legal drafting regarding waste incineration, solid fossil fuels and sustainable forest

management is set out in point 6 of the Annex.

(7) Transition and enabling activities

Introduction of both ‘enabling’ and ‘transition activities’ within the taxonomy was a demand

by the Council. The Parliament is only able to accept those activities provided they are framed

by appropriate conditions and are included as separate “categories” with specific disclosure

requirements within the taxonomy-compliant activities, as well as being subject to regular

review of the technical screening criteria relating to them in line with scientific and

technological developments.

14880/19 MP/jk 7

ECOMP.1.B LIMITE EN

Proposed legal drafting regarding waste incineration, solid fossil fuels and sustainable forest

management is set out in point (7) of the Annex.

(8) Life cycle

Proposed legal drafting regarding life cycle is set out in point 7 of the Annex.

(9) Review clause

The review clause was modified technically, but also to accommodate some requests by the

Parliament, as a compromise: the Commission to report on access to relevant data by financial

market participants and investors in determining the degree of alignment with the technical

screening criteria taking into account the administrative burden, the application of the

supervisory provisions. The Commission also to report on the appropriateness of further

developing the current taxonomy and expanding its scope, on the appropriateness of specific

disclosure requirements related to transitional and enabling activities.


(10) Timelines

Both the Commission proposal and the Parliament's position provided for differentiated entry

into application of provisions of the Taxonomy Regulation and of the related level 2 acts,

dependent on the objective pursued, where the measures pursuing climate-related objectives

would start applying on 1 July 2020, while measures pursuing the other remaining four

objectives would start to apply at a later date (on 31 December 2021). The Council's mandate

provided for entry into application of provisions relating to all objectives at the same moment,

on 31 December 2022. The understanding reached is a compromise between those positions

as it retains a differentiated entry of application to the effect that the climate-related

provisions would start applying on 31 December 2021, while the provisions relating to the

remaining four activities would start applying on 31 December 2022.

14880/19 MP/jk 8

ECOMP.1.B LIMITE EN

III. CONCLUSION

9. The Committee of Permanent Representatives is invited to:

‒ consider the results of the trilogues with a view to revise the negotiating mandate

with regard to the Taxonomy Regulation; and

‒ invite the Presidency to conclude as soon as possible the negotiations with the

European Parliament on the basis of this revised mandate with a view to reaching an

agreement in the form of a (pre-negotiated) Council position at first reading3.

__________________________________

3 Often referred to as an 'early second-reading agreement'.

14880/19 MP/jk 9

ECOMP.1.B LIMITE EN

ANNEX

Proposed legal drafting for key issues on the Taxonomy Regulation

For you information, please find below the new texts that the co-legislators worked out with a view to

finding a provisional understanding in the trilogue on the 5 December 2019. The texts below are

reproduced from the drafting notes as were shared in the trilogues without any other than just cosmetic

changes.

1. Material and personal scope

Recital

(X) The Commission guidelines on non-financial reporting, providing a supplement on reporting

climate-related information (2019/C 209/01), recommended that large companies should report on

certain climate-related key performance indicators based on the framework established by this

regulation. In particular, information on the proportion of a company’s turnover, CapEx or OpEx, which is compliant with the EU taxonomy would provide useful information to investors who are interested in

companies whose products and services substantially contribute to any one of the EU’s environmental objectives set out in this Regulation. It is therefore appropriate to require the annual publication of such

indicators by those large companies. While it would be disproportionately burdensome to extend such a

requirement to smaller companies, the latter may voluntarily decide to publish this information.

Article 1

Subject matter and scope

[…]

2. This Regulation applies to:

a. […]

b. financial market participants making available financial products as environmentally

sustainable investments or as investments having similar characteristics.

c. undertakings which are subject to the obligation to publish a non-financial statement

or a consolidated non-financial statement pursuant to Articles 19a or 29a of Directive

2013/34/EU.

14880/19 MP/jk 10

ECOMP.1.B LIMITE EN

Article 4

Use of the criteria for environmentally sustainable economic activities in public standards and

labels

Member States and the Union shall apply the criteria for determining environmentally sustainable

economic activities set out in Article 3 for the purposes of any measures setting out requirements on

market actors in respect of financial products or corporate bonds that are marketed as

‘environmentally sustainable’.

New Article 4α

Transparency of environmentally sustainable investments in pre-contractual disclosures and

periodic reports

Where a financial product referred to in Article 9(1), (2) and (3) of the Disclosure Regulation

invests in an economic activity that contributes to an environmental objective within the meaning of

Article 2(17) of that Regulation, the information to be disclosed in accordance with Articles 6(3)

and 11(2) of that Regulation shall include the following:

(a) the information on the environmental objective or environmental objectives to which the

investment underlying the financial product contributes, as set out in Article 5;

(b) a description of how and to what extent the investments underlying the financial product are

invested in environmentally sustainable economic activities, as set out in Article 3.

The description referred to in point (b) of the first subparagraph shall specify the share of

investments in environmentally sustainable economic activities, including details on the respective

proportions of enabling and transition activities, as a percentage of all investments selected for the

financial product.

14880/19 MP/jk 11

ECOMP.1.B LIMITE EN

New Article 4β

Transparency of financial products that promote environmental characteristics in pre-

contractual disclosures and periodic reports

Where a financial product referred to in Article 8(1) of the Disclosure Regulation promotes

environmental characteristics , Article 4α shall apply mutatis mutandis.

The information to be disclosed in accordance with Articles 6(3) and 11(2) of the Disclosure

Regulation shall be accompanied by the following statement:

The “do no significant harm” principle is applied only for the investments underlying the product

that take into account the EU criteria for environmentally sustainable investments.

The investments underlying the remaining portion of this financial product do not take into account

the EU criteria for environmentally sustainable investments.

New Article 4γ

Transparency of other financial products in pre-contractual disclosures and periodic reports

Where a financial product is not subject to Articles 8(1) and Articles 9(1),(2) and (3) of the

Disclosure Regulation, the information to be disclosed in accordance with the provisions of sectoral

legislation referred to in Articles 6(3) and 11(2) of that Regulation shall be accompanied by the

following statement:

‘The investments underlying this financial product do not take into account the EU criteria for

environmentally sustainable investments.’

14880/19 MP/jk 12

ECOMP.1.B LIMITE EN

New Article 4 delta

Transparency of undertakings in non-financial statements

1. Any undertaking which is subject to the obligation to publish a non-financial statement or a

consolidated non-financial statement pursuant to Articles 19a or 29a of Directive 2013/34/EU shall

include in its non-financial statement or consolidated non-financial statement:

(a) the proportion of its total turnover derived from products or services associated with

environmentally sustainable economic activities as set out in Article 3 and Article 5; or

(b) the proportion of its total investments (CapEX) and/or expenditures (OpEx) related to assets

or processes associated with environmentally sustainable economic activities as set out in

Article 3 and Article 5.

2. The Commission shall adopt a delegated act in accordance with Article 16 to supplement paragraph 1

to specify the methodology of calculation required to comply with that paragraph, taking into account

the technical screening criteria set out in accordance with this Regulation. The Commission shall adopt

the delegated act in accordance with paragraph 1 by [insert date 6 months after the date of entry into

application of the Regulation].

Part 2: Aligning RTS of Taxonomy and Disclosure Regulation [taken from EP non-paper]:

Article 2

“new 2. The ESAs shall, through the Joint Committee, develop draft regulatory technical standards

to specify the details of the presentation and content of the information in relation to the principle of

‘do not significantly harm’ in Article 2(17) in consistency and alignment consistent with the

content, methodologies, and presentation, and of indicators in relation to adverse impacts referred to

in paragraphs 6 and 7 of Article 4.

14880/19 MP/jk 13

ECOMP.1.B LIMITE EN

The ESAs shall submit the draft regulatory technical standards referred to in the first subparagraph

of this paragraph to the Commission by … [69 months after the entry into force of the before the

date referred to in Article 18(2)(a) of the initial Commission Taxonomy Regulation proposal].

Power is delegated to the Commission to supplement this Regulation by adopting the regulatory

technical standards referred to in the first subparagraph of this paragraph in accordance with

Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No

1095/2010.”

Article 8

Transparency of the promotion of environmental or social characteristics in pre-contractual

disclosures

“new 4. The ESAs shall, through the Joint Committee, develop draft regulatory technical standards to specify the details of the presentation and content of the information referred to in New Article 4β of the Taxonomy

Regulation.

When developing the draft regulatory technical standards referred to in the first subparagraph of this

paragraph, the ESAs shall take into account the various types of financial products, their characteristics and

the differences between them, as well as the objective that disclosures are to be accurate, fair, clear, not

misleading, simple and concise and, to achieve that objective, to amend, where necessary, regulatory

technical standards referred to in paragraph 3. The draft regulatory technical standards shall take into account

application dates referred to in Article 18 of the Taxonomy Regulation in respect of environmental objectives

referred to in Article 5 of that Regulation.

The ESAs shall submit the draft regulatory technical standards referred to in the first subparagraph of this

paragraph to the Commission by … [9 months after the entry into force of the before the date referred to in

Article 18(2)(a) of the initial Commission Taxonomy Regulation proposal].




1095/2010.”;

14880/19 MP/jk 14

ECOMP.1.B LIMITE EN

Article 9

Transparency of sustainable investments in pre-contractual disclosures

“new 6. The ESAs shall, through the Joint Committee, develop draft regulatory technical standards to specify

the details of the presentation and content of the information referred to in New Article 4α of the Taxonomy

Regulation.


paragraph, the ESAs shall take into account the various types of financial products, their objectives as

referred to in paragraphs 1, 2 and 3 and the differences between them as well as the objective that disclosures

are to be accurate, fair, clear, not misleading, simple and concise and, to achieve that objective, to amend,

where necessary, regulatory technical standards referred to in paragraph 5. The draft regulatory technical

standards shall take into account application dates referred to in Article 18 of the Taxonomy Regulation in

respect of environmental objectives referred to in Article 5 of that Regulation.


paragraph to the Commission by …[69 months after the entry into force of the before the date referred to

in Article 18(2)(a) of the initial Commission Taxonomy Regulation proposal].




1095/2010.”;

Article 11

Transparency of the promotion of environmental or social characteristics and of sustainable

investments in periodic reports

The following new paragraph 5 is inserted in Article 11 of the Disclosure Regulation:

“new 5. The ESAs shall, through the Joint Committee, develop draft regulatory technical standards to specify

the details of the presentation and content of the information referred to in Article 4α and Article 4β of the

Taxonomy Regulation.


paragraph, the ESAs shall take into account the various types of financial products, their characteristics and

objectives and the differences between them and amend, where necessary, regulatory technical standards

referred to in paragraph 4. The draft regulatory technical standards shall take into account application dates

referred to in Article 18 of the Taxonomy Regulation in respect of environmental objectives referred to in

Article 5 of that Regulation. The ESAs shall update the regulatory technical standards in the light of

regulatory and technological developments.


paragraph to the Commission by … [69 months after the entry into force of the before the date referred to

in Article 18(2)(a) of the initial Commission Taxonomy Regulation proposal].

14880/19 MP/jk 15

ECOMP.1.B LIMITE EN




1095/2010.”;

New text for Art 18

Article 4(1) shall not apply to certificate based tax incentive schemes that exist prior to the entry

into force of this Regulation setting out requirements for financial products that aim to finance

sustainable projects.

2. Climate neutrality

ELEMENT 1

Reinforcing the ‘life cycle’ principle in recital 24 and Art 12 and 14 and reinforcing the DNSH

principle

Line 63 – Recital 24- life-cycle

“When establishing and updating the technical screening criteria, the Commission should ensure that those criteria are based on available scientific evidence, are developed by taking into account life cycle

(considerations), including available live-cycle assessment, considering significant and long term

risks to the environment”

Line 300 – Art 12 para 1 point d

After the COM’s proposal text to add:

“In particular where the long term disposal of waste may cause significant and long term risks to

the environment”

Line 303 – Art 12 para 1a

“When assessing an economic activity against the criteria (a) to (f), the environmental impacts of the activity itself, as well as of the product and services provided by that activity throughout their life

cycle shall be taken into account, notably by considering their production, use and end-of-life.”

14880/19 MP/jk 16

ECOMP.1.B LIMITE EN

Line 316 – Art 14 para 1 point f

“Technical screening criteria shall take into account life cycle [considerations], by considering the

environmental impacts of the economic activity itself, as well as of the products and services provided

by that economic activity, notably by considering their production, use and end-of-life”

ELEMENT 2

315 – dropping ’where relevant’ in ”Art 14.1e” when referring to the precautionary principle

enshrined in Art 191 TFEU

Line 315 would then read:

“e. be based on conclusive scientific evidence and be based on, where relevant, the precautionary

principle enshrined in Art 191 TFEU”

ELEMENT 3

Explicit exclusion of solid fossil fuels from the eligibility

Line 324 - art. 14 - para. 2a (new)

EP’s text kept.

Line 325 - art. 14 - para. 2b (new)

EP’s text deleted.

Line 326 - Art. 14 - para. 2c (new)

EP’s text deleted.

ELEMENT 4

Line 186 – dropping climate (carbon) neutral energy from “Art 6 para 1 point a” and moving the climate

neutral energy in Recital (24a)

14880/19 MP/jk 17

ECOMP.1.B LIMITE EN

Recital (24a)

(24a) In defining the technical screening criteria for the climate change mitigation objective, the

Commission should take into account and incentivise the ongoing and necessary transition towards a

climate-neutral economy. The transition, in addition to the use of climate neutral energy and more

investments in economic activities and sectors that are already low carbon, requires substantial

reductions in greenhouse gas emissions in other economic activities and sectors for which there are no

technologically and economically feasible low carbon alternatives. Those economic activities should be

considered to substantially contribute to climate change mitigation if their greenhouse gas emissions are

substantially lower than sector or industry average, they do not hamper the development and

deployment of low-carbon alternatives and they do not lead to a lock-in in assets incompatible with the

objective of climate-neutrality, considering the economic lifetime of those assets. The technical

screening criteria for these activities should ensure that these transitional activities have a credible path

towards climate neutrality, and these technical screening criteria should be adjusted accordingly at

regular intervals.

ELEMENT 5

Regular review of the technical screening criteria for transition activities

Article 14, para 4

”The Commission shall regularly review the technical screening criteria referred to in paragraph 1, in

particular for activities referred to in Article 6(1a), and, where appropriate, amend the delegated acts

adopted in accordance with this Regulation in line with scientific and technology developments.

ELEMENT 6

Reference to a target year of achieving climate neutrality

Recital XX – referring to 2050 climate neutrality target – Commission’s New Green Deal

Communication to be adopted on 11 December 2019 [or the EUCO deal on climate neutrality – TO BE

CONFIRMED]

14880/19 MP/jk 18

ECOMP.1.B LIMITE EN

3. Governance

[New Recital]

(X) Before adopting a delegated act, the Commission should consult experts designated by each

Member State in accordance with the principles laid down in the Interinstitutional Agreement of 13

April 2016 on Better Law-Making.

[New Recital (33ba)] (previous line 361)

(33ba) The Platform should carry out its tasks in accordance with the principle of transparency.

The Commission shall should provide to the Expert Group referred to in Article 16b access on a timely

basis to the agendas, minutes of meetings, the reports and assessments and any relevant materials of the

Platform that have been provided in accordance with paragraph 2.

Article 15 L361a

Platform on Sustainable Finance

[NEW paragraph 5] Experts of the Member State holding the Presidency of the Council shall

automatically have access to the meetings of the Platform, referred to in Article 15.

Recital 33 L78

33) To ensure the adequate participation of the Member States in the development of the technical

screening criteria, the Commission should continue the existing Member States Expert Group on

sustainable finance and consult it in accordance with the principles laid down in the Intterinstitutional

Agreement of 13 April 2016 on Better Law-Making. The tasks of this expert group will, inter alia,

consist of advising the Commission on the appropriateness of the technical screening criteria and the

approach taken by the Platform with regard to developing these criteria. For this purpose, the

Commission should inform Member States through meetings to facilitate an exchange of views between

Member States.

14880/19 MP/jk 19

ECOMP.1.B LIMITE EN

Article 6 L197

2. The Commission shall adopt delegated acts in accordance with Article 16 to: and, prior to their

adoption, gather all necessary expertise from the Platform regarding technical screening criteria

and assess the implementation of the criteria taking into account the outcome of their application

by financial markets to:

L204

. The Commission shall, within the framework of the delegated act referred to in paragraph

2 of this Article, adopt implementing acts to set quantitative or qualitative thresholds, or a combination

thereof, which must be met by the economic activity in order to be considered environmentally

sustainable.

4. The Commission shall adopt the delegated act referred to in paragraph 2 by 31

December 2019, with a view to ensure its entry into application on 1 July 2020.

4. The Commission shall adopt the delegated act referred to in paragraph 2 by [31 December

2019], with a view to ensure its entry into application on 1 July 2020.]

Those implementing acts shall be adopted in accordance with the examination procedure referred

to in Article 16a.

Article 16 L367-375

Exercise of the delegation

[References to the specific empowerments must be streamlined in light of the overall agreement of

delegations of powers]

1. The power to adopt delegated acts is conferred on the Commission, subject to the conditions laid

down in this Article.

2. The power to adopt delegated acts referred to [in Articles 4(3), 6(2), (3), (4) and (5), 7(2), (3),

(4) and (5), 8(2), (3), (4) and (5) , 9(2), (3), (4) and (5), 10(2), (3), (4) and (5)and 11(2), (3), (4)

and (5) shall be conferred on the Commission for an indeterminate period from [Date of entry

into force of this Regulation].]

14880/19 MP/jk 20

ECOMP.1.B LIMITE EN

3. The delegation of powers referred to in paragraph 2 may be revoked at any time by the

European Parliament or by the Council. A decision to revoke shall put an end to the delegation

of the power specified in that decision. It shall take effect the day following the publication of

the decision in the Official Journal of the European Union or at a later date specified therein. It

shall not affect the validity of any delegated acts already in force.

Article 16b

Member States Expert Group

1. A Member States Expert Group on Sustainable Finance (Member States Expert Group) shall

advise the Commission on the appropriateness of the technical screening criteria and the

approach taken by the Platform referred to in Article 15 regarding the developing of the criteria in accordance with Article 14.

2. The Commission shall inform Member States through meetings of the expert group to facilitate

an exchange of views between the Member States and the Commission on a timely basis, in

particular as regards the key output of the Platform, such as new screening criteria or material updates thereof, or draft reports.

The Commission shall gather all necessary expertise, prior to the adoption and during the

development of delegated acts, including through the consultation of the experts of the Member

States Expert Group.

Before adopting a delegated act, the Commission shall consult experts designated by each

Member State in accordance with the principles and procedures laid down in the

Interinstitutional Agreement of 13 April 2016 on Better Law-Making.

3. The Commission shall gather all necessary expertise, prior to the adoption and during the

development of delegated acts, including through the consultation of the experts of the Member States Expert Group.

Before adopting a delegated act, the Commission shall act in accordance with the principles and

procedures laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-

Making.

Article 16a Committee procedure

L376-378 shall be deleted.

14880/19 MP/jk 21

ECOMP.1.B LIMITE EN

4. Minimum safeguards

Article 13

Minimum Safeguards

“When implementing procedures to comply with the minimum safeguards referred to in Article

3(c), undertakings shall adhere to the principle of ‘do not significantly harm’ referred to in Article

2(17) of Regulation xyz/2019 on sustainability-related disclosures in the financial services sector.”

Recitals related to Minimum Safeguards:

(21) Recalling the joint commitment of the European Parliament, the Council and the

Commission to pursue the principles enshrined in the European Pillar of Social Rights in support of

sustainable and inclusive growth and recognising the relevance of international minimum human

and labour rights and standards, compliance with minimum safeguards should be a condition for

economic activities to qualify as environmentally sustainable. For that reason economic activities

should only qualify as environmentally sustainable where they are carried out observing in

alignment with the OECD Guidelines for Multinational Enterprises and UN Guiding Principles on

Business and Human Rights, including the International Labour Organisation’s (‘ILO’) declaration

on Fundamental Rights and Principles at Work, and the eight ILO core conventions and the

International Bill of Human Rights. The ILO core conventions define human and labour rights that

companies should respect. Several of those international standards are also enshrined the Charter of

Fundamental Rights of the European Union, in particular the prohibition of slavery and forced

labour and the principle of non-discrimination. Those minimum safeguards are without prejudice to

the application of more stringent requirements on environment, health and safety and social

sustainability set out in Union law, where applicable.

When implementing these minimum safeguards, undertakings should adhere to the principle of ‘do

not significantly harm’ within the meaning of Regulation xyz/2019 on sustainability-related

disclosures in the financial services sector, including regulatory technical standards further

specifying that principle.

14880/19 MP/jk 22

ECOMP.1.B LIMITE EN

In order to ensure consistency between this Regulation and Regulation xyz/2019 on sustainability-

related disclosures in the financial services sector, this Regulation amends Regulation xyz/2019 on

sustainability-related disclosures in the financial services sector to introduce regulatory technical

standards developed jointly by ESAs to further specify the details of the presentation and content of

the information in relation to the principle of ‘do not significantly harm’. These regulatory technical

standards should be consistent with the content, methodologies, and presentation of indicators in

relation to adverse impacts referred to in paragraphs 6 and 7 of Article 4. They should also be

consistent with the principles enshrined in the European Pillar of Social Rights, the OECD

Guidelines for Multinational Enterprises, UN Guiding Principles on Business and Human Rights,

including the International Labour Organisation’s (‘ILO’) declaration on Fundamental Rights and

Principles at Work, the eight ILO core conventions and the International Bill of Human Rights,

5. Supervision

[NEW Recital X]

(X) National competent authorities, ESMA, EBA, and EIOPA should exercise the product

intervention powers laid down in PEPP, PRIIPS, and MIFIR also with respect to misselling practices or

misleading disclosures of sustainability-related information, including requirements laid down in the

Taxonomy Regulation.

14880/19 MP/jk 23

ECOMP.1.B LIMITE EN

6. Key environmental concepts

1. Minimising and avoiding incineration

Line 251:

minimising avoiding incineration and avoiding disposal (including landfilling) of waste, in

accordance with principles of the waste hierarchy as set out in Article 4 of Directive

2008/98/EC;

Amending line 300 (However, there will be other changes in this line):

“…a significant increase in the generation, incineration or disposal of waste, with the exception of

incineration of non-recyclable hazardous waste”, which would be accommodating the notion of

the Council that for certain waste streams incineration is a sensible treatment option, and provides

for enhanced legal clarity compared to a reference to the waste hierarchy.

2. Solid fossil fuels

Keeping line 324 from the European Parliament proposal. Deleting lines 325 and 326.

Deleting line 191 and moving the substance in line 196. Find the text in enabling and

transitional text.

3. Sustainable forest management

Deleting L136 (Art. 2.1.n): the definition of sustainable forest management.

Article L285

d) sustainable forest management, including stewardship and practices and use of forests and forest

land that contribute to maintaining or enhancing biodiversity or to halting or preventing degradation

of other ecosystems, deforestation and habitat loss.

4. Technological neutrality

Line 311 – Article 14 - para. 1 - point a

The Council text is kept.

14880/19 MP/jk 24

ECOMP.1.B LIMITE EN

7. Transition and enabling activities

Article 6

1. An economic activity shall be considered to contribute substantially to climate change mitigation

where that activity substantially contributes to the stabilization of greenhouse gas concentrations in

the atmosphere at a level which prevents dangerous anthropogenic interference with the climate

system by avoiding or reducing greenhouse gas emissions or enhancing greenhouse gas removals

through any of the following means, including through process or product innovation, consistent

with the long term temperature goal of the Paris Agreement:

[…]

(x) enabling any of the above in accordance with Article 11a

1a. For the purposes of paragraph 1, an economic activity for which there is no

technologically and economically feasible low carbon alternative, shall be considered to

contribute substantially to climate change mitigation as it supports the transition to a climate-

neutral economy consistent with a pathway to limit the temperature increase to 1.5 degrees

Celcius above pre-industrial levels including by phasing out greenhouse gas emissions, in

particular from solid fossil fuels, where that activity:

(i) has greenhouse gas emission levels that correspond to the best performance in the

sector or industry;

(ii) does not hamper the development and deployment of low-carbon alternatives; and

(iii) does not lead to a lock-in in carbon-intensive assets considering the economic lifetime

of those assets.

For the purpose of this paragraph and the establishment of technical screening criteria in

accordance of Article 14, the Commission shall assess the potential contribution of all relevant

existing technologies.

14880/19 MP/jk 25

ECOMP.1.B LIMITE EN

Articles 7-11

1. An economic activity shall be considered to contribute substantially to […] where that activity

substantially contributes to […] through any of the following means […]:

[…]

(x) enabling any of the above in accordance with Article 11a

Article 11a

Enabling activities

An economic activity shall be considered to contribute substantially to one or more of the

environmental objectives set out in Article 5 by directly enabling other activities to make a

substantial contribution to one or more of those objectives, and where that activity:

a. does not lead to a lock-in in assets that undermine long-term environmental goals,

considering the economic lifetime of those assets;

b. has a substantial positive environmental impact on the basis of lifecycle considerations.

Article 14

1. The technical screening criteria adopted in accordance with Articles 6(2), 7(2), 8(2), 9(2),

10(2) and 11(2) shall:

[…]

g. take into account the nature and the scale of the economic activity, including:

(i) whether it is an enabling activity referred to in Article 11a;

(ii) whether it is a transitional activity referred to in Article 6(1a);

and clearly indicate, where applicable, if the economic activity belongs to one of the

categories referred to in points (i) and (ii).

14880/19 MP/jk 26

ECOMP.1.B LIMITE EN

Article 14

[…]

4. The Commission shall regularly review the technical screening criteria referred to in pargraph 1

and, where appropriate, amend the delegated acts adopted in accordance with this Regulation in line

with scientific and technological developments.

To ensure that economic activities referred to in Article 6(1a) remain on a credible transition

pathway consistent with a climate-neutral economy, the Commission shall review the technical

screening criteria for those activities [at least every 3 years] and, where appropriate, amend the

delegated act referred to in Article 6(2) adopted in accordance with this Regulation in line with

scientific and technological developments.

8. Life cycle

In Article 14.f (line 316, Commission proposal text), which covers the development of TSC for

both substantial contribution and do no significant harm, an explicit reference to life cycle

considerations could be added:

Technical screening criteria [including those that address the requirements of Article 12] shall

“take into account the life cycle, including evidence from existing life cycle assessments, by

considering the environmental impacts of the economic activity itself, as well as of the products

and services provided by that economic activity, notably by considering their production, use

and end-of-life”

In addition, EP amendment in Art. 12, line 296 could be accepted, with the following changes:

1. For the purposes of Article 3(b), taking into account its full the life cycle of the products and

services provided by that economic activity, including evidence from existing life cycle

assessments, an economic activity shall be considered as significantly harming:

14880/19 MP/jk 27

ECOMP.1.B LIMITE EN

In recital 20 (line 59), the Council text can be supported by moving certain elements4 and with a

potential addition, so that:

“For each environmental objective, uniform criteria for considering economic activities to be substantially contributing to that objective should be laid down. One element of the uniform

criteria should be to avoid significant harm to any of the environmental objectives set out in this

Regulation. Those criteria should take into account impacts from the production, use and

end-of-life of products and services provided by that economic activity, including from

available life cycle assessments. This is This is in order to avoid that investments are

considered environmentally sustainable although the economic activities benefitting from those

investments cause harm to the environment to an extent outweighing their contribution to an

environmental objective. The criteria should take into account the life cycle of the products and

services provided by that economic activity, including evidence from existing life cycle

assessments, notably by considering their production, use and end-of-life, in addition to the

environmental impacts of the economic activity itself. ”

In recital 24, concerning criteria on ‘do no significant harm’ (line 63, COM proposal text), an explicit reference to life cycle considerations could be added, reflecting the change proposed below

in Art. 14:

[…] When establishing and updating the technical screening criteria, the Commission should ensure that those criteria are based on available scientific evidence, are developed by taking into

account life cycle considerations, including existing life cycle assessments, and are updated

regularly. […]

In recital 29 (line 73), the following could be added:

To avoid overly burdensome compliance costs on economic operators, the Commission should

establish technical screening criteria that provide for sufficient legal clarity, are practicable, easy

to apply and with which compliance can be verified within reasonable cost-of-compliance

boundaries. Technical screening criteria could require carrying out a life cycle assessment when

sufficiently practicable and needed.

4 It is suggested to move the sentence “Those criteria should take into account […]” in order for it

to apply both to ‘substantial contribution’ and ‘do no significant harm’ aspects.

14880/19 MP/jk 28

ECOMP.1.B LIMITE EN

9. Review clause

Article 17

Review clause

1. By [2 years after entry into force], and subsequently every three years thereafter, the

Commission shall publish a report on the application of this Regulation. That report shall

evaluate the following:

(a) the progress on the implementation of this Regulation with regard to the development of

technical screening criteria for environmentally sustainable economic activities;

(b) the possible need to revise and complement the criteria set out in this Regulation for

considering an economic activity environmentally sustainable;

(c) the use of the definition of environmentally sustainable investment in Union law, and at

Member State level, including the provisions required for setting up additional

verification mechanisms of compliance with the criteria set out in this Regulation.

(d) the effectiveness of the taxonomy in channeling private investments into sustainable

activities and in particular as regards the flows of capital into private enterprises and

other legal entities, particularly equity capital, on one hand through financial products

referred to in this Regulation and, on the other hand, through other than financial

products, in application of the technical screening criteria;

(e) access by financial markets participants referred to in this Regulation, and investors to

reliable, timely and verifiable information and data regarding companies and other legal

entities, taking into account related administrative burden, as well as modalities of

verification of such data, necessary in determining the degree of alignment with the

technical screening criteria and ensuring compliance with it, taking into account

investees within and outside the scope of the Regulation and in both cases, as regards

equity and debt capital as well as any related administrative burden.

(f) [supervisory provisions set out in this Articles 15a and 15b]*

14880/19 MP/jk 29

ECOMP.1.B LIMITE EN

1a. By 31 December 2021, the Commission shall publish a report describing the provisions

required for extending the scope of this Regulation to:

(a) further develop the current taxonomy and expand its scope beyond environmentally

sustainable economic activities in order to cover economic activities having that do not have

a significant impact on environmental sustainability as well as activities that do significantly

harm environmental sustainability as well as review the appropriateness of specific

disclosure requirements related to transitional and enabling activities;

(b) cover other sustainability objectives, including social objectives;

1b. By [2 years after the entry into force], the Commission shall assess the effectiveness of the

advisory procedures for the development of the technical screening criteria set up by this

Regulation.

2. The reports referred to in paragraph 1, 1a and 1b shall be sent to the European Parliament and

to the Council. The Commission shall make accompanying proposals where appropriate.

-------

*subparagraph (f)will might require further adaptations to be delegated to technical meeting on

Articles 15a and 15b in order to make sure the Commission has sufficient information to

perform such task

______________________________

limite en - politico€¦ · ecomp.1.b limite en annex proposed legal drafting for key issues on...

Documents