Response to this month’s EU Taxonomy consultation

EU Taxonomy

It is vital that the EU Taxonomy takes a science-based approach to regulation and that it contains science-based thresholds. That’s the view of Impak Analytics in responding to the recent EU Taxonomy consultation on the amended Climate Delegated Act and Environmental Delegated Act.

Impak supports a science-based approach to regulatory development and is, in particular, convinced of the necessity to have science-based thresholds in the EU Taxonomy, the company said in a statement that added: Thresholds based on the latest scientific advice are essential to ensure that sustainable investments align with the objectives established by the Paris Agreement. Indeed, impak’s methodology is based on the Impact Management Project Norms (IMP Norms, now hosted by Impact Frontiers), and the IMP recognises the EU Taxonomy as a framework of regional ecological thresholds to determine if an activity is sustainable. As such, an EU Taxonomy based on robust scientific advice has the potential to be a useful complementary tool in our analysis.

Furthermore, we acknowledge the criticism from environmental NGOs and campaigners regarding the inclusion of aviation leasing, manufacturing, and passenger and freight flight in the EU Taxonomy as activities that can contribute to climate change mitigation. According to experts, the aviation industry accounts for about 2 percent of global CO2 emissions. The sector requires new technology with true emissions reduction potential to contribute to climate change mitigation, such as zero-emissions planes and sustainable aviation fuels. Should these activities remain within the scope of the EU Taxonomy, we would therefore recommend the establishment of more stringent criteria than those currently proposed.

We also acknowledge the two ongoing lawsuits the EU Commission faces regarding the labelling of gas and nuclear activities, on the basis that such classification generates a non-alignment with the Paris Agreement, the European Climate Law and the Taxonomy Regulation itself. In this regard, we reiterate the requirement within the EU Taxonomy Regulation that the European Commission establishes classifications and technical screening criteria based on available scientific evidence.

Regarding the “Consultancy for climate risk management” activity, impak supports the fact that the methodology used must be based on best practices, standards, guidelines and science in line with IPCC recommendations. We suggest that a similar activity be included within the scope of the Taxonomy Regulation that focuses on contribution to climate change mitigation.

Indeed, to reach Paris Agreement goals, there is a need for consultancy activities enabling businesses or organizations to manage not only the adaptation to physical risks of climate change but also to mitigate their impact on climate change, as demonstrated by the principle of double materiality.

Furthermore, given that any meaningful advance in the fight against climate change will need to rely on quality, reliable data, an activity relating to the provision and analysis of environmental data could also be introduced as part of the EU Taxonomy. For instance, ESG rating agencies and impact rating agencies that assess issuers’ contribution to Sustainable Development Goals objectives or the EU Taxonomy environmental objectives contribute to mitigating negative environmental impacts.

Finally, we note that, according to Article 12(5) of the Taxonomy Regulation, the delegated act relating to the four remaining environmental objectives was to be published “by 31 December 2021, with a view to ensuring its application from 1 January 2023”. While we understand that it was impossible to publish the delegated acts within this timeline as originally planned, we suggest that the twelve month period between publication and application be respected to allow the market time to align their reporting and ensure compliance.

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