France, Germany, Italy urge revision of EU Taxonomy
Europe’s policies must take ‘more realistic’ approach to climate and transition risk, say leaders
European policymakers have been urged to amend a key part of the EU Taxonomy Regulation in the latest attack on the Commission’s sustainable finance rulebook.
In a letter seen by Real Economy Progress, the finance heads of France, Germany and Italy told the Commission that “climate and transition risks should be addressed in a coherent and more realistic manner” within the policy package.
“To this end, we should provide for a suitable framework that is also fit for the purpose of promoting a gradual transition of enterprises while ensuring a level playing field,” it continued.
“For instance, a first step could be to evaluate and review the green asset ratio applicable to financial institutions,” the letter suggested, referring to the way that banks are required to quantify their contribution to climate- and environmentally-friendly lending under the Taxonomy Regulation.
Banks must disclose what proportion of their overall financing supports activities included in the taxonomy, so they can be judged and compared by regulators, investors and other stakeholders.
But SMEs and companies outside the EU aren’t required to supply taxonomy data, so banks can’t prove they are eligible. This means banks with heavy exposure to such entities are likely to come off worse in the final calculation than those focused on lending to big EU firms.
“At the moment, especially exposure to SMEs, international activities and derivatives, among others, can lead to distorted green asset ratios,” argued the letter, addressed to the heads of the Commission’s financial stability and services unit, John Berrigan and Patricia Reilly.
It is signed by Heiko Thoms, secretary of state for Germany’s ministry of finance and European policy; and Bertrand Dumond and Riccardo Barbieri, directors general of the French and Italian treasuries, respectively.
Over the summer, the German government’s advisory body on sustainable finance produced a paper recommending that the green asset ratio was amended under the new Commission. The country’s insurance association is also running a campaign to have the Taxonomy’s requirements scaled back.
Mounting pushback on EU rules
Attempts to temper some of the EU’s sustainability ambitions are ramping up as the new Commission prepares its legislative agenda for the next five years.
Germany’s justice minister is calling for the Corporate Sustainability Reporting Directive to be renegotiated, and yesterday rulemakers caved to pressure to delay the EU Deforestation Regulation.
Subject to approve by Parliament and Council, the latter will be pushed back by one year, meaning large companies must comply by the end of 2025 and SMEs from June 2026.
