Proposal of Regulation EU on the establishment of a framework to facilitate sustainable investment (Part 2)

Morning, Winter Sunshine, Frost - Camille Pissarro

With this entry we follow the first part referred to the Sustainable Investment Regulation (SRI Regulation), which can be seen HERE.

Articles 6 to 11 of the SRI Regulation establish both the technical criteria of substantial contribution of each activity to the environmental objectives, and the technical criteria of do no significant harm to the environmental objectives (DNSH). Regarding these criteria, the SRI Regulation provides the basic rules and establishes the duty to develop them through delegated acts (between 2020 and 2022).

As already mentioned, one of the requirements to be met for an activity to be environmentally sustainable is, in addition to producing a substantial contribution to an environmental objective, that it does not cause significant harm to other environmental objectives (the DNSH principle). For this reason, the definition of significant harm for each of the objectives is provided in article 12 of the SRI Regulation.
  1. For mitigation of climate change: where that activity leads to significant greenhouse gas emissions.
  2. For adaptation to climate change: where that activity leads to increased negative effect of current and expected climate, for and beyond the natural and built environment within which that activity takes place.
  3. For the sustainable use and protection of water and marine resources, where that activity is detrimental to a significant extent to good status of Union waters, including freshwater, transitional waters and coastal waters, or to good environmental status of marine waters of the Union.
  4. For the transition to a circular economy and waste prevention and recycling: where that activity leads to significant inefficiencies in the use of materials in one or more stages of the life-cycle of products, including in terms of durability, reparability, upgradability, reusability or recyclability of products; or where that activity leads to a significant increase in the generation, incineration or disposal of waste.
  5. For the prevention and control of pollution: where that activity leads to significant increase in emissions of pollutants to air, water and land, as compared to the situation before this activity started.
  6. For the protection of healthy ecosystems: where that activity is detrimental to a significant extent to the good condition of ecosystems.

With regard to the minimum safeguards to be met by SRI, these must comply with the following social criteria (in accordance with the ILO): the right not to be subjected to forced labour, the freedom of association, workers' right to organise, the right to collective bargaining, equal remuneration for men and women workers for work of equal value, non-discrimination in opportunity and treatment with respect to employment and occupation, as well as the right not to be subjected to child labour.

We hope that, once the technical development of the environmental criteria has been completed, the social criteria will be included in greater detail in EU regulations and a social taxonomy will be also adopted to the same or a similar degree as the environmental one.

The SRI Regulation also provides for the creation of a Platform on sustainable finance, chaired by the Commission and formed by:
  • Representatives of the European Environment Agency, the European Supervisory Authorities and the European Investment Bank and European Investment Fund.
  • Experts representing private sector stakeholders.
  • Experts appointed in a personal capacity in the fields covered by the SRI Regulation.

This Platform on sustainable finance will: advise the Commission on the technical criteria, analyze the impact of the criteria in terms of costs and benefits, assist the Commission in analyzing stakeholder applications, advise the Commission on the appropriateness of the criteria for new applications, monitor SRI-oriented capital flows, and advise the Commission on amendments to the SRI Regulation.