The EU’s 28 Member States have reached a common position on an EU classification system, or “taxonomy”, to identify what economic activities are to be considered environmentally sustainable. The European Parliament voted on its position on the taxonomy in March 2019. Negotiations between the Council and the Parliament are therefore ready to start.

The taxonomy regulation is part of the EU Sustainable Finance Action Plan. As mentioned in a previous FERMA article, it aims to ensure an EU-wide approach to sustainable labelling in order to help policy makers, industry and investors to support and invest in economic activities that contribute to a climate neutral economy.

Points of contention between the European Council and Parliament include in particular the eligibility of nuclear projects for green finance and the timeline.

• EU ministers decided not to exclude nuclear projects from the sustainable finance classification scheme, despite opposition from Germany, Austria, Luxembourg and the European Parliament.
• The European Parliament supports a fast timeline in order to use the taxonomy as early as possible, meaning from July 2020. However, the European Council proposes in its joint position to have the taxonomy in place by the end of 2021, so as to ensure its full application by the end of 2022.

Complaints about time pressure have emerged from the private sector, notably the financial industry. In a joint letter to the European Commission on 16 September, the industry argued that the timeline of the regulation on sustainability disclosures, one of the two other proposals of the 2018 Sustainable Finance Action Plan, is unrealistic.