Feedback reference
Submitted by
Julia Linares
User type
Non-governmental organisation (NGO)
WWF European Policy Office
Organisation size
Small (10 to 49 employees)
Transparency register number
Country of origin

WWF European Policy Office welcomes the European Commission’s opportunity to give feedback on the proposal for a regulation on the establishment of a framework to facilitate sustainable investment.
It is a positive step of the Commission, consistent with the EU Sustainable Finance Action Plan. We would like to make the following comments to the Commission’s legislative proposal:

1. We believe that this legislative proposal is a key opportunity to plan a process for establishing a complementary ‘brown taxonomy’ listing unsustainable activities. Such a brown taxonomy would be developed in a similar way with a Technical Expert Group. Timewise, it would be relevant to start such a process once the green taxonomy-related process is close to be achieved, ie in end 2019-2020.
It is important to note that the market is already using different types of brown taxonomies: for example ESG analysts and data providers increasingly have their in-house brown taxonomies as they are assessing the green and brown revenues of listed companies and selling such data to investors. Assessing brown revenues of companies implies the use of a brown taxonomy. The Credit Rating Agencies have their in-house brown taxonomies as well: for example Moody’s published its heatmap in November 2015 already, assessing sector credit risk and exposure to five categories of environmental risks. Last but not least, some central banks and financial supervisors are starting as well to call for brown taxonomies to be developed. Most recently, the Governor of the Banque de France, François Villeroy de Galhau, called publicly for such a taxonomy to be established .
Similarly to an official EU green taxonomy, an EU brown taxonomy will have multiple benefits: avoid EU market fragmentation, provide much greater clarity to both issuers and financial institutions as to what are brown activities, and be a building block for multiple opportunities of financial products to accelerate the necessary shift from brown to green finance – that the green taxonomy alone cannot solve.

2. As much as possible, the taxonomy needs to be dynamic in order to reflect latest environmental science, and avoid a rigid static list. The long term governance mechanism to regularly update the list of activities is very positive and CSOs with relevant expertise should be part of such a mechanism. The taxonomy should be updated at the latest every three years to properly capture the latest environmental and climate science, technological innovation, etc. While it is more complex, there should also be efforts to capture regional differences. The aim should be to increasingly reflect environmental and climate science-based pathways and build on forward-looking scenario analysis everywhere possible, as key overarching principles and frameworks to define which activities can be deemed green at a certain point in time and how their classification should evolve.

3. The taxonomy should be conservative, in the sense that if a given activity is deemed green by some stakeholders but is controversial for others that are providing science-based evidence for their concerns, such an activity should not be included in the taxonomy. In order to have a credible taxonomy that can serve as a robust basis for financial products and avoid greenwashing risks, vested interests should not pollute the taxonomy.

4. The taxonomy should be designed for use for all financial stakeholders including banks – not only investors. The taxonomy should notably be easy to use in equity investment processes, bond investment processes, lending processes, direct investment processes into real assets and project finance.

5. The do no harm principle on social issues should be strengthened and broadened, as it only focuses on labour rights currently.

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