The EU provides a strong enabling environment for financial systems to become supportive of the Paris climate goals. On 22 June 2020, the Taxonomy Regulation (TR) 2020/852 was published in the Official Journal of the European Union and entered into force on 12 July 2020. On 9 March 2020, the TEG had published its final report on the EU Taxonomy. The report contains recommendations relating to the overarching design of the EU Taxonomy, as well as extensive implementation guidance on how companies and financial institutions can use and disclose against the EU Taxonomy. As part of the Taxonomy Regulation, the Commission was tasked with coming forward with technical screening criteria (through ‘delegated acts’) to develop the taxonomy further. The first two sets were published in a draft delegated on November 20, which is now open for feedback. It concerns those activities that substantially contribute to climate change mitigation or climate change adaptation.
The EU has already established a comprehensive incentive framework for green finance particularly through EIB and EBRD. The recent update of the EIB lending policy marks a turning point for the financing of energy projects as most fossil fuels will be excluded from the end of 2020. This change could become a role model for lending and financing policies by other institutions. In November 2020, EIB published its Climate Banks Roadmap, stating that every project seeking support by EIB has to pass an evaluation on climate change impacts.
The European enabling environment could be strengthened by the ECB taking a role model position on climate-related disclosure of its own portfolios. The EU should consider climate change in all investment decisions and make them compliant with the goals in the Paris Agreement as part of the Multiannual Financial Framework (MFF) and the recovery programme NextGenEU.