Assessing environmentally sustainable investments
Regulation (EU) 2020/852 on establishing a framework to facilitate sustainable investment
It aims to allow investors to know whether an economic activity is environmentally sustainable by setting common EU-wide criteria.
It amends Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial sector.
Action plan on sustainable growth
This ‘taxonomy’ regulation is one of a number of actions designed to help achieve the 3 objectives of the action plan, which are:
to reorient capital flows towards sustainable investments to achieve sustainable and inclusive growth;
to manage financial risks stemming from climate change, natural disasters, environmental degradation and social issues; and
to foster transparency and a long-term outlook for financial and economic activity.
The regulation sets out the following criteria to be applied by the EU and EU countries to decide whether an economic activity is environmentally sustainable.
It contributes substantially to 1 or more of the environmental objectives set out in the regulation.
It does not significantly harm any of these environmental objectives.
It is carried out in compliance with the minimum safeguards set out in the regulation.
It complies with technical screening criteria set up by the European Commission in accordance with the regulation.
For the purpose of the regulation, environmental objectives are:
climate change mitigation*;
climate change adaptation*;
the sustainable use and protection of water and marine resources;
the transition to a circular economy;
pollution prevention and control;
the protection and restoration of biodiversity and ecosystems.
The regulation sets out the steps that an economic activity must take to make a substantial contribution or to not significantly harm any of these objectives.
The regulation requires the Commission to set out a list of environmentally sustainable activities by defining technical screening criteria for each environmental objective. These criteria will be established by means of delegated acts.
Application & Background
The regulation has applied since 12 July 2020.
For further information see:
EU taxonomy for sustainable activities (European Commission)
Financing the climate transition (Council of the European Union).
Climate change mitigation: the process of keeping the increase in the global average temperature to well below 2°C and pursuing efforts to limit it to 1.5°C above pre-industrial levels, as laid down in the Paris Agreement.
Climate change adaptation: the process of adjusting to actual and expected climate change and its impacts.
Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 (OJ L 198, 22.6.2020, pp. 13-43)
Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions: The European Green Deal (COM(2019) 640 final, 11.12.2019)
Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector (OJ L 317, 9.12.2019, pp. 1-16)
Successive amendments to Regulation (EU) 2019/2088 has been incorporated into the original text. This consolidated version is of documentary value only.
Regulation (EU) 2019/2089 of the European Parliament and of the Council of 27 November 2019 amending Regulation (EU) 2016/1011 as regards EU Climate Transition Benchmarks, EU Paris-aligned Benchmarks and sustainability-related disclosures for benchmarks (OJ L 317, 9.12.2019, pp. 17-27)
Communication from the Commission – Guidelines on non-financial reporting: Supplement on reporting climate-related information (OJ C 209, 20.6.2019, pp. 1-30)
Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources (OJ L 328, 21.12.2018, pp. 82-209)
Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, pp. 19-76)
Regulation (EU) No 525/2013 of the European Parliament and of the Council of 21 May 2013 on a mechanism for monitoring and reporting greenhouse gas emissions and for reporting other information at national and Union level relevant to climate change and repealing Decision No 280/2004/EC (OJ L 165, 18.6.2013, pp. 13-40)