The European Commission set up a Technical expert group on sustainable finance (TEG) to assist it in developing, in line with the Commission's legislative proposals of May 2018
- an EU classification system – the so-called EU taxonomy – to determine whether an economic activity is environmentally sustainable;
- an EU Green Bond Standard;
- methodologies for EU climate benchmarks and disclosures for benchmarks; and
- guidance to improve corporate disclosure of climate-related information.
The TEG commenced its work in July 2018. Its 35 members from civil society, academia, business and the finance sector, as well as additional members and observers from EU and international public bodies work both through formal plenaries and subgroup meetings for each workstream. To allow it to conclude its technical work and retain the expertise before the future Platform on sustainable finance is set up, the mandate of the TEG has been extended until 30 September 2020.
For more information about the TEG’s work and the legislative proposals that guide it, see also the frequently asked questions.
In order to present and discuss the final reports of the TEG on the EU taxonomy as well as further user guidance in relation to its recommendations for an EU Green Bond Standard, the Commission hosted a web-based stakeholder dialogue on 12 March 2020.
In its 26 April 2020 statement on the Covid-19 crisis (also available in French, Italian and Spanish), the TEG encourages governments and the private sector to use EU Taxonomy, the Green Bond Standard and the Climate Benchmarks as tools to ensure a 'resilient, sustainable and fair' recovery.
The TEG has been working on developing the EU taxonomy for climate change mitigation and climate change adaptation. In December 2018, the TEG published an early feedback report which contained a first set of climate change mitigation activities and their technical screening criteria, together with a call for feedback on the proposed criteria. The call for feedback closed on 9 January 2019.
The TEG also engaged with over 200 additional experts in the first half of 2019 to develop technical screening criteria for the second round of climate change mitigation and adaptation activities.
Drawing on feedback from stakeholders and expert advice, the TEG published a first version of its technical report in June 2019, proposing technical screening criteria for substantial contribution to climate change mitigation across 67 economic activities, as well as setting out the conceptual approach for climate change adaptation and initial guidance on how to use the taxonomy.
After taking into consideration a second round of feedback, which took place in summer 2019, the TEG published the final report on EU taxonomy on 9 March 2020. It contains recommendations relating to the overarching design of the taxonomy, as well as guidance on how companies and financial institutions can make disclosures using the taxonomy.
The final report is supplemented by a technical annex containing an updated list of technical screening criteria for economic activities that can substantially contribute to climate change mitigation or adaptation, including an assessment of significant harm to other environmental objectives.
In addition, the TEG has prepared excel tools to help users of the Taxonomy to implement it in their own activities.
EU Green Bond Standard
The TEG has been working on recommendations for the development of an EU Green Bond Standard, with a view to increasing transparency and comparability of the green bond market, as well as to provide clarity to issuers on the steps to follow for an issuance, in order to scale up sustainable finance.
On 18 June 2019, the TEG published a preliminary report on EU Green Bond Standard, to reflect both the feedback received from stakeholders and the latest analyses conducted by the Group. A summary of the report is also available. There was no additional call for feedback on the June report.
Building on the recommendations of the June 2019 report, the TEG published on 9 March 2020 its Usability guide for the EU Green Bond Standard. This guide offers market actors guidance on the use of the proposed standard and the set-up of a market-based registration scheme for external verifiers.
The European Commission will explore the possibility of a legislative initiative for an EU Green Bond Standard in the context of the public consultation on the renewed sustainable finance strategy, taking place from March to May 2020.
The TEG has been working on recommendations for the European Commission on the definition of minimum standards for the methodology of the ‘EU Climate Transition’ and ‘EU Paris-aligned’ benchmarks, that are aligned with the objectives of the Paris Agreement and addressing the risk of greenwashing. It has also worked on disclosure requirements in relation to Environmental, Social and Governance (ESG) factors in the benchmark statement and the benchmark methodology for all types of benchmarks (except interest rate and foreign exchange benchmarks) including the standard format to be used to report such elements.
The TEG engaged extensively with experts in the field, organising several roundtables and workshops in order to obtain the best possible expertise and input.
On 18 June 2019, the TEG published an interim report on Climate benchmarks and benchmarks’ ESG disclosures. A summary of the report is also available. The interim report was subject to a 6-week call for feedback.
Following an analysis of the responses received, and amendments to the report where appropriate, the TEG published the final version of the report on 30 September 2019. The final report will serve as a basis to the drafting of delegated acts by the Commission in accordance with the empowerments contained in the amending benchmark Regulation. The draft delegated act will be subject to a formal 4-week public consultation by the Commission. The draft delegated acts are expected to be adopted early 2020.
On 20 December 2019, the Technical Expert Group on Sustainable Finance (TEG) published a handbook on climate benchmarks and benchmarks’ ESG disclosures to provide clarifications to issues and queries raised by stakeholders during the call for feedback and including a detailed mapping of classifications of economic activities.
Following the publication, the European Commission will develop delegated acts building on the TEG report. The European Commission will conduct a formal 4-week consultation on those delegated acts.
The TEG work on climate-related disclosures had a slightly different timeline than the other three tasks. The TEG published its final report on climate-related disclosures in January 2019.
The new guidelines on reporting climate-related information are a supplement to the non-binding guidelines on non-financial reporting published by the Commission in 2017. They are consistent with the requirements of the non-financial reporting Directive, and they also integrate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). They provide guidance for companies on how to report on the impacts of their business on the climate and on the impacts of climate change on their business.