A team of experts in sustainable finance appointed to advise the European Union has suggested revisions to the bloc's regulations for defining climate-friendly activities, aiming to reduce companies' reporting obligations by a third.
The proposal to simplify the EU's guidelines for green investments precedes a comprehensive review of the EU's wider sustainability regulations and aligns with Brussels' efforts to promote green finance.
As the EU seeks to simplify business regulations, concerns arise within the bloc about competition due to U.S. President's push for deregulation.
To promote green investments and ease the burden on businesses, the EU advisors recommend requesting less information from certain companies, allowing flexibility in using proxies and estimates, and implementing other measures to streamline the EU's taxonomy regulations.
The EU taxonomy is a comprehensive framework for categorizing sustainable economic activities, guiding firms in aligning their investments, lending practices, and business operations with sustainability criteria.
Proposed adjustments include facilitating compliance with the "Do No Significant Harm" criteria, which financial institutions and companies must adhere to in order to demonstrate that green investments or activities do not harm other environmental goals.
Overall, the expert group's suggestions are expected to reduce the reporting requirements for non-financial companies by one-third, as stated by the EU Platform on Sustainable Finance, commissioned by the European Commission to simplify and enhance the taxonomy.
The recommendations presented focus solely on the taxonomy and do not extend to broader corporate green reporting obligations.
For banks and investment companies, the proposed changes are substantial, enabling simpler reporting on the portion of their assets that qualify as green and streamlining the process of ensuring that green investments do not compromise other environmental standards, the paper noted.