The European Banking Federation, together with the United Nations Environment Programme Finance Initiative (UNEP FI), has today launched a report that for the first time assesses how the EU Taxonomy can be applied to core banking products. The report is based on case studies analysing transactions and existing client relationships across a large spectrum of sectors, economic activities and geographical locations.
The EU Taxonomy is a classification system for environmentally sustainable economic activities that was developed by the European Commission. The system aims to provide a reliable reference for what can be considered sustainable, primarily in the interest of transparency. The Taxonomy will complement the EU banking sector’s commitments to deliver on its critical role in financing the transition to a more sustainable economy. This includes the activities and initiatives in the areas of ESG risk management, financial innovation, and portfolio alignment with the Paris Agreement. Consistent, well-founded definitions of sustainable economic activities will increase transparency for investors and other stakeholders, such as the civil society and the scientific community, as well as enable the provision of finance to support such activities.
The report, ‘Testing the application of the EU Taxonomy to core banking products – High-level recommendations,’ is the result of a one-year collaboration between 25 major European banks, seven banking associations and five observing organisations. It tests, pilots and assesses the complexities of applying the EU Taxonomy to core banking products. Drawing on the insights from case studies in corporate banking, SME and retail lending and other products, the report identifies the benefits and challenges of applying the EU Taxonomy. It outlines concrete steps and principles for practical application of the taxonomy regulation and offers eight recommendations for regulators and legislators, owners of standards and frameworks, labels and certification schemes, and banks themselves to facilitate and improve the operationalizing of the EU taxonomy for its application to banking products.
Says Wim Mijs, Chief Executive Officer of the European Banking Federation: “The EU Taxonomy sets ambitious goals and steep challenges for businesses and banks alike. Our report for the first time analyses the Taxonomy from a banking perspective. One thing is clear: significant efforts will be required on all sides. We need to improve the data availability and we need lots of innovative thinking. This to make sure that the EU objectives of climate neutrality and those of the EU Green Deal are successfully met. The Taxonomy will be a driver of sustainability discussions within our industry and will undoubtedly contribute to accelerating the green transition. We are committed to continuous engagement with the Commission as the Taxonomy continues to expand and evolve, especially now that transition finance becomes increasingly important.”