New EC Measures Prioritise Transition Finance

The European Commission has released guidance designed to increase the flow of transition finance, as part of a new package of measures to strengthen the bloc’s sustainable finance framework. The guidance includes practical examples of how the tools of the EU sustainable finance framework – including the Green Taxonomy, EU Climate Benchmarks, the EU Green Bond Standard, and transition plans – can be used by firms to channel investments into the low-carbon transition and manage risks stemming from climate change and environmental degradation. “Sustainable finance tools can be used to support the definition of transition targets and articulate specific transition finance needs at the level of the undertaking and at the level of economic activities, said the Commission, emphasising that its “sustainable finance toolbox” supported firms “with different starting points”. It pointed out that transition finance is compatible with the Green Taxonomy, particularly when such investments are disclosed as capital expenditure on economic activities that will become taxonomy aligned over a five-to-ten-year period. Mairead McGuinness, Commissioner for Financial Services, Financial Stability and Capital Markets said, “We 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.” The new package also included the finalised delegated acts for non-climate aspects of the Green Taxonomy, amendments to the EU Taxonomy Climate Delegated Act to include the manufacturing and transport sectors, and a proposal for regulation of ESG ratings providers.

 

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