Streamlined Platform on Sustainable Finance aims to ensure European taxonomy drives capital to support net zero transition.
The EU’s Platform on Sustainable Finance (PSF) is embarking on a new phase focused on transition finance and the practical application of the bloc’s environmental taxonomy.
This is the intention and remit of Helena Viñes Fiestas, Commissioner of the Spanish Financial Markets Authority Comisión Nacional de Mercados y Valores (CNMV), who has been appointed as the new Chair of the body initially established to develop the European taxonomy.
“The original technical expert group (TEG) was fascinating because we effectively had a blank sheet of paper,” Viñes Fiestas told ESG Investor.
“PSF 2.0 is facing a different situation; the foundations have been set, and now it’s about making it work. Implementation is the core focus and the devil is always in the details. How is it being implemented? Where are the challenges? What works and what doesn’t work? And how we can we fix it?”
Streamlining down from 57 to 35 members spanning finance, academia and NGOs, PSF 2.0 will continue to aid the European Commission in its development and delivery of the taxonomy, which classifies economic activities that can be considered environmentally sustainable.
“We will be looking at transition finance, and how companies can maximise their access to [taxonomy-aligned] capital to finance their transition,” she said.
“The platform will also be working on activities that it hasn’t yet looked at,” Viñes Fiestas revealed.
“Some are maybe not as central, but are nonetheless important, such as those that are part of value chains and are enabling activities.” Enabling activities include the production of wind turbines or pipelines for renewables, she explained.
A recent proposal for a taxonomy published by Canada’s Sustainable Finance Action Council (SFAC) also proposed that such enabling activities may qualify for a ‘green’ label.
Practical application
It’s vital that companies and investors are able to practically apply the taxonomy to their business and investment decisions, said Viñes Fiestas.
“We’re in a situation where the taxonomy and other pieces of the regulation are being implemented when they’re not quite finished, with some aspects still in the making – that ultimately creates some confusion within the European market,” she noted.
“We’re going to look at whether definitions are consistent across the board, that there’s no duplication, and firms can get maximum usage from [the pieces of the taxonomy].”
Part of the PSF’s work will also be to consider how the taxonomy fits with other aspects of EU regulation. Notable examples include the Sustainable Finance Disclosure Regulation (SFDR) and Corporate Sustainability Reporting Directive (CSRD), both of which require qualifying entities to disclose how, and to what extent, their economic activities align with the taxonomy.
“We need to take these pieces of the regulatory jigsaw that have been developed separately, and see how well they fit together and polish them,” she said.
Viñes Fiestas added that she is encouraged by the level of ambition of the EU and the scale of regulatory progress that has been made over the past few years.
“The regulators are now on the steering wheel of sustainable finance.”
Making it work
The PSF has previously developed and submitted proposals for a social taxonomy and a transition taxonomy. The latter introduced a ‘traffic light’ framework that would extend the taxonomy to cover all economic activities while outlining the potential environmental impacts of the amber (transition-related activities) and red (too environmentally damaging to transition) activities.
The Commission has fallen silent on both of these proposals. Viñes Fiestas, who is also a member of the UN Secretary General’s High-level Panel on Net Zero Commitments, said it will be up to the Commission whether and how they decide to proceed with these proposals.
“Before we go any further with the taxonomy [i.e., extending to include social and transition taxonomies], we need to make this one work, as well as the connections to other pieces of regulation tied to the taxonomy,” she said. During a meeting of the European Financial Reporting Advisory Group (EFRAG) in February, the Commission confirmed that it would be adopting the technical screening criteria for the remaining four environmental objectives of the taxonomy on 30 June through a delegated act which will then go through a public consultation.
This follows previous criticism of the Commission’s decision to include gas and nuclear energy in the taxonomy, prompting a mass exit of PSF members who claimed the decision went against the science and commitments to limit global warming to 1.5°C.
PSF 2.0 has a scheduled plenary meeting for all members next week, said Viñes Fiestas.
“I am thrilled to have been appointed Chair of the PSF,” she said.
“I’ve dedicated the last 20 years of my life to sustainable finance and the role of the private sector. [previous PSF Chair] Nathan Fabian is an inspiration, and it’s been a delight to work hand-in-hand with him over the past four years.”
