68

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Sustainable finance – EU taxonomy: A framework to facilitate sustainable investment

25-04-2019

In March 2018, under its capital markets union project and as part of a broader initiative on sustainable development, the European Commission presented an action plan on sustainable finance, in order to facilitate investments in sustainable projects and assets across the EU. On 24 May 2018, the Commission put forward a package of three proposals, including measures to create a sustainable taxonomy for the EU; provide clarity on how environmental, social and governance factors can be taken into account ...

In March 2018, under its capital markets union project and as part of a broader initiative on sustainable development, the European Commission presented an action plan on sustainable finance, in order to facilitate investments in sustainable projects and assets across the EU. On 24 May 2018, the Commission put forward a package of three proposals, including measures to create a sustainable taxonomy for the EU; provide clarity on how environmental, social and governance factors can be taken into account for investment decisions; and establish low-carbon benchmarks. The first proposal focuses on establishing a common language for sustainable finance (e.g. a unified EU classification system, or taxonomy) through a framework of uniform criteria, as a way to determine whether a given economic activity is environmentally sustainable. On 11 March 2019, the ECON-ENVI joint committee adopted a report on the Commission proposal, calling for a number of changes. On 28 March 2019, the Parliament adopted its position at first reading. On the other hand, the Council is continuing to review the Commission's proposal. Second edition. The 'EU Legislation in Progress' briefings are updated at key stages throughout the legislative procedure.

Sustainable finance and benchmarks: Low-carbon benchmarks and positive-carbon-impact benchmarks

15-04-2019

In May 2018, the European Commission presented a package of measures on the financing of sustainable growth. The package includes three proposals aimed at establishing an EU taxonomy on sustainable economic activities, improving disclosure requirements and creating a new category of benchmarks to help investors measure the carbon footprint of their investments. Financial benchmarks have an important impact on investment flows. Many investors rely on them for creating investment products, measuring ...

In May 2018, the European Commission presented a package of measures on the financing of sustainable growth. The package includes three proposals aimed at establishing an EU taxonomy on sustainable economic activities, improving disclosure requirements and creating a new category of benchmarks to help investors measure the carbon footprint of their investments. Financial benchmarks have an important impact on investment flows. Many investors rely on them for creating investment products, measuring their performance and devising asset allocation strategies. The Commission proposes to create a new category of benchmarks comprising low-carbon and positive-carbon-impact benchmarks, by amending the Benchmark Regulation. As the regulation is directly applicable, amending it would restrict the possibility of divergent measures being taken by the competent authorities at national level. Parliament voted in plenary on 26 March 2019 to approve the compromise text agreed in trilogue negotiations. However, due to the tight timeline for finalisation before the end of the parliamentary term, the Council has not yet adopted the text at first reading as Parliament will first have to approve, through a corrigendum procedure, the final revised text.

An EU framework to facilitate investments in environmentally sustainable economic activities

12-04-2019

This initial appraisal assesses the strengths and weaknesses of the European Commission's impact assessment accompanying its proposals for three regulations on: establishing a framework to facilitate sustainable investment disclosures relating to sustainable investments and sustainability risks; and on introducing two new categories of carbon benchmarks in the (benchmark) Regulation (EU) 2016/1011. The legislative package on sustainable finance deals with technical and inherently complex issues; ...

This initial appraisal assesses the strengths and weaknesses of the European Commission's impact assessment accompanying its proposals for three regulations on: establishing a framework to facilitate sustainable investment disclosures relating to sustainable investments and sustainability risks; and on introducing two new categories of carbon benchmarks in the (benchmark) Regulation (EU) 2016/1011. The legislative package on sustainable finance deals with technical and inherently complex issues; it is therefore not surprising that the IA accompanying it reflects such a complexity, which is not always dealt with in a clear and immediately understandable way. This might also explain the double negative opinions, unusually followed in this case by a positive opinion with reservations issued by the Commission's Regulatory Scrutiny Board (RSB). The consequences of the two identified problems (lack of incentives to consider ESG factors and high search costs faced by end-investors), and how they would evolve without EU action, are described in a satisfactory way, as well as their underlying drivers. As required, the IA identifies general and specific objectives, but no operational objectives that would have informed about how the preferred options are expected to operate in practice. This is very likely due to the fact the operational aspects of the proposals are envisaged to be defined, and analytically developed, by subsequent delegated acts. The IA's preferred options are selected after considering both a non-legislative and a regulatory approach, although two of them contains some aspects that are not entirely clear. As regards its scope, the IA has only partially succeeded in explaining the impacts considered in an entirely satisfactory way. The IA does not include an analysis of competitiveness nor an analysis of impacts, if any, on SMEs. The evidence included in the IA provides ample and detailed insights into the issues considered and some methodological limitations, regarding the proposal on low carbon and positive carbon impact benchmarks are acknowledged in the IA. The Commission has consulted extensively a broad range of stakeholders, whose views have been satisfactorily reported in the IA or in a separate document containing the results of the second open public consultation. Overall, the IA appears to have addressed the majority of the improvements requested by the RSB. Finally, the legislative proposals seem to be consistent with the analysis carried out in the IA.

Connecting Europe Facility 2021-2027: Financing key EU infrastructure networks

08-04-2019

The EU supports the development of high-performing, sustainable and interconnected trans-European networks in the areas of transport, energy and digital infrastructure. The trans-European networks policy was consolidated in 2013, and the Connecting Europe Facility (CEF) set up as a dedicated financing instrument to channel EU funding into the development of infrastructure networks, help eliminate market failures and attract further investment from the public and private sectors. Following a mid-term ...

The EU supports the development of high-performing, sustainable and interconnected trans-European networks in the areas of transport, energy and digital infrastructure. The trans-European networks policy was consolidated in 2013, and the Connecting Europe Facility (CEF) set up as a dedicated financing instrument to channel EU funding into the development of infrastructure networks, help eliminate market failures and attract further investment from the public and private sectors. Following a mid-term evaluation, which confirmed the CEF programme's capacity to bring significant EU added value, the European Commission proposed to renew the programme under the next long term EU budget. The Transport Council of 3 December 2018 agreed a partial general approach on the proposal, excluding financial and horizontal issues, which are still under discussion as part of the EU budget for 2021-2027. The European Parliament adopted its negotiating position on 12 December 2018. Interinstitutional negotiations (trilogues) concluded on 8 March with a partial provisional agreement on the architecture of the future programme. Having been endorsed by Coreper and jointly by the Parliament's TRAN and ITRE committees, the agreement is due to be voted at first reading by Parliament in April. The remaining issues will have to be agreed at second reading. Third edition. The 'EU Legislation in Progress' briefings are updated at key stages throughout the legislative procedure.

A framework to facilitate sustainable investment

20-03-2019

In May 2018, the Commission submitted a proposal to establish a common framework to facilitate sustainable investment. The proposal would launch a unified EU classification system to help determine whether an economic activity is environmentally sustainable. Under the Parliament's joint committee procedure, the ECON and ENVI committees have jointly adopted a report, expected to be voted in plenary in March.

In May 2018, the Commission submitted a proposal to establish a common framework to facilitate sustainable investment. The proposal would launch a unified EU classification system to help determine whether an economic activity is environmentally sustainable. Under the Parliament's joint committee procedure, the ECON and ENVI committees have jointly adopted a report, expected to be voted in plenary in March.

Sustainable finance and disclosures: Bringing clarity to investors

13-03-2019

On 24 May 2018, the Commission published three proposals for regulations reflecting the EU's efforts to connect finance with its own sustainable development agenda. The proposals include measures to: create an EU sustainable finance taxonomy; make disclosures relating to sustainable investments and sustainability risks clearer; and establish low-carbon benchmarks. In particular, the proposal for a regulation on disclosures aims to integrate environmental, social and governance considerations into ...

On 24 May 2018, the Commission published three proposals for regulations reflecting the EU's efforts to connect finance with its own sustainable development agenda. The proposals include measures to: create an EU sustainable finance taxonomy; make disclosures relating to sustainable investments and sustainability risks clearer; and establish low-carbon benchmarks. In particular, the proposal for a regulation on disclosures aims to integrate environmental, social and governance considerations into the decision-making process of investors and asset managers. It also aims to increase the transparency duties of financial intermediaries towards end-investors, with regard to sustainability risks and sustainable investment targets. This should reduce investors' search costs for sustainable investments and enable easier comparison between sustainable financial products in the EU. In the Parliament, the ECON committee adopted its report on the proposed regulation in November 2018. On 7 March 2019, the Romanian EU Council Presidency and the Parliament reached a preliminary agreement on the proposal in trilogue discussions, and that agreement now needs to be confirmed by Parliament, with the plenary vote expected in April. First edition. The 'EU Legislation in Progress' briefings are updated at key stages throughout the legislative procedure.

Covered bonds – Issue and supervision, exposures

25-02-2019

Covered bonds are debt securities issued by credit institutions and secured by a pool of mortgage loans or credit towards the public sector. They are characterised further by the double protection offered to bondholders, the segregation of assets in their cover pool, over-collateralisation, and their strict supervisory frameworks. Currently, their issuance is concentrated in five Member States. National regulatory regimes vary widely in terms of supervision and composition of the cover pool. Lastly ...

Covered bonds are debt securities issued by credit institutions and secured by a pool of mortgage loans or credit towards the public sector. They are characterised further by the double protection offered to bondholders, the segregation of assets in their cover pool, over-collateralisation, and their strict supervisory frameworks. Currently, their issuance is concentrated in five Member States. National regulatory regimes vary widely in terms of supervision and composition of the cover pool. Lastly, despite benefiting from preferential treatment under the Capital Requirements Regulation (CRR), they share no common definition, which can lead to different securities benefiting from this treatment. To remedy this, the Commission has adopted proposals for, on the one hand, a directive, which would lay down investor protection rules and provide common definitions, and on the other, a regulation, which would amend the CRR with regard to covered bond exposures. In November 2018, Parliament and Council both adopted their respective negotiating positions. The file is currently the subject of trilogue negotiations. Second edition. The ‘EU Legislation in Progress’ briefings are updated at key stages throughout the legislative procedure.

Environment action programme: Living well, within the limits of our planet

11-12-2018

The European Union (EU) has been protecting the environment since the early 1970s, under the premise that economic prosperity and environmental protection are interdependent. Successive environment action programmes have set the framework for EU environmental policy. The seventh environment action programme, a binding decision adopted by the European Parliament and Council in 2013, covers the period from 2014 to 2020. Bearing the title 'Living well, within the limits of our planet', it seeks to achieve ...

The European Union (EU) has been protecting the environment since the early 1970s, under the premise that economic prosperity and environmental protection are interdependent. Successive environment action programmes have set the framework for EU environmental policy. The seventh environment action programme, a binding decision adopted by the European Parliament and Council in 2013, covers the period from 2014 to 2020. Bearing the title 'Living well, within the limits of our planet', it seeks to achieve a 2050 vision for sustainability. The seventh environment action programme sets nine priority objectives: three 'thematic' objectives (on natural capital; on a resource-efficient, green and competitive low-carbon economy; and on health and well-being), four 'enabling' objectives (on implementation of EU law; on the knowledge and evidence base; on investments and externalities; and on policy coherence), and two 'horizontal' objectives (on cities; and on the international dimension). The three thematic objectives are linked to a large number of initiatives, legislative acts and international agreements. A 2017 report by the European Environment Agency sums up progress towards meeting the three thematic objectives as follows: on natural capital, the EU is not on track to meet the 2020 objectives; on a resource-efficient, green and competitive low-carbon economy, and on health and well-being, the 2020 outlook is mixed. The European Parliament is supportive of the action programme. In 2018, it urged the Commission and the Member States to step up its implementation. The European Commission is expected to publish its evaluation of the seventh environment action programme by mid-2019, and could subsequently put forward a proposal for an eighth environment action programme.

Establishing the Connecting Europe Facility 2021-2027

13-11-2018

This initial appraisal assesses the strengths and weaknesses of the European Commission's impact assessment accompanying its proposal for establishing the Connecting Europe Facility (CEF) for the 2021-2027 period. CEF is an EU funding instrument designed to promote and part-finance the construction of pivotal cross border transport, energy and telecommunications infrastructure links between the EU's Member States. The proposal intends to support the achievement of the EU policy objectives in the ...

This initial appraisal assesses the strengths and weaknesses of the European Commission's impact assessment accompanying its proposal for establishing the Connecting Europe Facility (CEF) for the 2021-2027 period. CEF is an EU funding instrument designed to promote and part-finance the construction of pivotal cross border transport, energy and telecommunications infrastructure links between the EU's Member States. The proposal intends to support the achievement of the EU policy objectives in the transport, energy and digital sectors as regards the trans-European networks and to support cross-border cooperation between Member States on renewables planning and deployment. The appraisal concludes that the impact assessment (IA) provides a good description of the policy challenges of the new CEF based on the mid-term evaluation of the programme. The IA envisages a change in the scope for the digital and energy sectors. Alternative options are identified for the energy sector only. The IA would have benefited from better illustrating if, and in case how, the preferred option would take advantage from the existing, or forthcoming, legislation in establishing the envisaged enabling framework for cross-border cooperation on renewables. The IA does not discuss social or environmental impacts of the proposed measures and economic impacts are discussed for the energy sector only. Potential impacts on SMEs are not discussed, although SMEs might have deserved some analysis considering the specific objectives of the trans-European networks for the digital sector. An analysis regarding the impact on competitiveness appears to be missing as well. The final version of the IA appears to have addressed almost entirely the improvements requested by the Regulatory Scrutiny Board.

Establishing the InvestEU programme

26-10-2018

Building on the Investment Plan for Europe, the Commission proposes to create the InvestEU programme, which would bring various existing EU financial instruments into a single structure. This would contribute to the cross-cutting MFF objectives (simplification, flexibility, synergies, coherence) and to the budgetary aim of ‘doing more with less’. This proposal, which would seek to mobilise public and private investments to reduce investment gaps, is based on the stakeholder consultation and different ...

Building on the Investment Plan for Europe, the Commission proposes to create the InvestEU programme, which would bring various existing EU financial instruments into a single structure. This would contribute to the cross-cutting MFF objectives (simplification, flexibility, synergies, coherence) and to the budgetary aim of ‘doing more with less’. This proposal, which would seek to mobilise public and private investments to reduce investment gaps, is based on the stakeholder consultation and different ex post evaluations of the programmes having relevancy for the InvestEU programme. The IA accompanying the proposal provides a thorough description of the challenges in investment, comprising both qualitative and quantitative elements, and links the proposed measures to the identified challenges. The IA discusses also risks and mitigating measures, although the risks and risk management could perhaps have elaborated in more detail. As regards alternative options, the IA discusses some options (implementing partners, organisation of governance, blending and combinations of the support) but does not provide an assessment and comparison of various options as is normally required under the better regulation guidelines. It would have benefited the analysis if the assessment of the expected competitiveness, economic, social and environmental impacts had been more elaborated as in this respect the IA is not very informative.

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