To ensure sustainability and the transition to a climate-neutral, resilient, circular and efficient economy, the European Union has promoted the availability of financial products with environmental sustainability objectives for private investment in sustainable activities, in response to the climate emergency, including green bonds, green loans and other dynamic instruments.

Sustainable investment and financing have grown exponentially in recent years, in connection with ESG criteria, that is, environmental, social and corporate governance criteria. In the near future, growth is expected to be even faster, as the market and investors increasingly embrace environmental concerns.

The European Commission has played an important role in the regulation of sustainable investment, harmonizing the criteria and eliminating obstacles to the functioning of the internal market, bearing in mind the entirety of the financial system and the specificities and ambitions of the EU in the climate domain, with the intention of reducing greenwashing phenomena.

It is through Regulation (EU) 2020/852, of the European Parliament and of the Council, of 18 June 2020 (Taxonomy Regulation), in force since 12 July 2020, that the respective legal framework is established, with emphasis on applicable criteria and which make it possible to identify which investments are sustainable.

In addition to the criteria provided for in the taxonomy, the Regulation also provides for additional obligations in terms of pre-contractual information and periodic reports for financial market players that provide financial products (credit institutions, investment companies and management companies, for example) and for companies subject to the obligation to publish a non-financial statement or consolidated non-financial statement.

Here we explore the criteria applicable to sustainable investment and the implications of the taxonomy for companies and investors.

To access the full article, download the PDF below.