Clifford Chance

EU finalises Sustainable Finance Taxonomy: New obligations for financial market participants and large public-interest entities

24 January 2020

Political agreement was reached in December 2019 on the Taxonomy Regulation following intense negotiations. The Taxonomy Regulation sets out categories of economic activities that are considered environmentally sustainable and is a cornerstone of the European Commission's Sustainable Finance Action Plan. 

The Taxonomy Regulation imposes three key obligations:

• on member states and at EU level to apply the Taxonomy when regulating how environmentally sustainable financial products or corporate bonds are made available;
• on "financial market participants" (including AIFMs, UCITS managers, investment firms and credit institutions providing portfolio management, insurers which make available an insurance based investment product as well as providers of certain pension products) to make statements about alignment of investments with the Taxonomy when making available financial products, including when these products are not considered to be environmentally sustainable; and
• on large public-interest entities (including certain EU entities with listed securities, banks and insurers) to include information about how their activities align with the Taxonomy in the non-financial disclosure part of their financial statements.

Key changes in the agreed Taxonomy Regulation from the original Commission proposal include the expansion of environmentally sustainable activities to specifically include 'transitional' and 'enabling' activities, the expansion of the non-financial disclosure obligations on large public-interest entities, and changes made to the Disclosure Regulation to impose additional requirements on financial market participants. 

This briefing analyses the changes in the Taxonomy Regulation, sets out the impacts for different entities, and in an Annex, provides an overview of the Taxonomy.

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