The Climate Delegated Act details where compliance with the Technical Screening Criteria needs to be verified and for which activities. For the majority of activities, verification requirements cover both quantitative and qualitative information on methodologies and calculations of greenhouse gas (GHG) emissions. An independent third party will be required to verify quantified life cycle GHG emissions, including verification of how the reporting entity’s activity performed against a threshold.
Importantly, the report specifically highlights that “qualitative information contextualises and explains quantitative performance data, and therefore, its verification is important to ensure overall consistency.”
With regard to forward-looking data, it is specifically noted that “reasonable assurance” provides assurance that “such information has been prepared in accordance with applicable standards.” It is recommended that the most efficient way of achieving this threshold is to use of science-based and transparent methodologies when compiling forward-looking data and targets.
Assurance of use-of-proceeds debt instruments
Although the report gives recommendations relating to potential verification requirements for use-of-proceeds debt instruments, they are given under the caveat that “the issuance of financial instruments per se does not entail or reference Taxonomy-related reporting.” Despite this caveat, it is recognised that demand for Taxonomy-aligned instruments will play an increasingly important role in the financing and achievement of transition and net-zero ambitions.
The Platform recommends that the European Commission require issuers of green bonds and similar use-of-proceeds financial instruments to:
- report against the EU Taxonomy
- obtain third-party verification for allocation and impact reports; and,
- ensure that the verifier is registered and supervised by ESMA or an official authority for non-EU issuances.
Sustainable Finance Regulatory Framework
The final section of the report deals with the coherence between interlinked European sustainable finance regulation, such as the CSRD, SFDR and MiFID II. The main recommendation targets the exclusion of the requirement for investors to calculate Taxonomy-alignment of their portfolios using Opex, as the metric is difficult to find and adds little value for end-investors.
CSRD: With regards to the CSRD, the European Commission, in tandem with the new Platform 2.0, should ensure alignment between the Taxonomy, the CSRD and the European Sustainability Reporting Standards (ESRS). This refers to terminology, sustainability indicators and their calculation method as well as human rights and corporate governance criteria defined in the Minimum Social Safeguards.
SFDR: Recommendations tackle the alignment of metrics used in the Taxonomy and SFDR, as well as aligning social and governance Principle Adverse Impacts (PAIs) with the Taxonomy minimum safeguards and environmental PAIs with DNSH criteria. Furthermore, it is proposed to include a list of always significantly harmful activities.