During the last years, the European Commission has been keen to encourage sustainable investments. It is in the framework of its 2018 Action Plan on Sustainable Finance that it launched the "EU taxonomy", a classification system that provides all economic and financial actors with a common understanding of what should be considered a “sustainable” economic activity in the EU. By creating this harmonised classification system, the Commission aims to help investors, companies, issuers etc. channel investments into “environmentally friendly” activities. The Taxonomy Regulation was published in the Official Journal of the European Union on 22 June 2020 and entered into force on 12 July 2020.
In the framework of the Taxonomy Regulation, a dedicated Platform on Sustainable Finance (PSF) was set up in October 2020. Its main objective was to advise the European Commission in drafting the so-called technical screening and Do-No-Significant Harm criteria of the taxonomy for environmentally sustainable economic activities, including for activities carried out by construction companies. FIEC was represented in the Platform on Sustainable Finance’s Technical Working Group (TWG). The Platform on Sustainable Finance’s second iteration (also known as “Platform 2.0”) started working in March 2023 and shifted its focus from devising “eligibility” rules for the taxonomy towards implementation and usability.
In light of the EU’s ambitious environmental and sustainability policies and considering the attitude of clients towards environmental sustainability, construction companies cannot continue with “business as usual”. Sustainability will not just be an “added value” or a “nice-to-have”. It will soon become a “licence to operate” for contractors.
The Taxonomy Regulation is one of the cornerstones of the EU’s sustainability and sustainable finance policies. It establishes the basis for the EU taxonomy by setting out overarching conditions (six environmental objectives, so-called Do-No-Significant-Harm criteria, and minimum social safeguards) that an economic activity must meet to qualify as environmentally sustainable. Under this Regulation, the Commission had to come up with the actual list of environmentally sustainable activities by defining technical screening criteria for each environmental objective through so-called delegated acts, the first of which, defining criteria for the first two environmental objectives, was published in the Official Journal on 9 December 2021 and is applicable since January 2022. Several construction activities having the potential to mitigate climate change are covered by this Climate Delegated Act.
A second draft delegated act (“Environmental Delegated Act”) that will contain technical criteria for the remaining four environmental objectives was published in April 2023. To ensure that the criteria for construction activities are usable and can be met by all companies of the sector, it was of crucial importance that FIEC was represented in the Technical Working Group of the PSF. FIEC will continue to follow the work of “Platform 2.0” that will be mandated to advise the Commission from Q1 2023 until Q4 2024.
Under the EU taxonomy, all undertakings within the scope of the Non-Financial Reporting Directive (NFRD) must report on their share of their taxonomy-eligible activities (since 1st January 2022). From January 2023, companies in scope will also have to report on their taxonomy alignment. The NFRD has been amended by the Corporate Sustainability Reporting Directive (CSRD). This means that more companies, even listed small and medium-sized companies, will soon have to report detailed sustainability information according to new European sustainability reporting standards (ESRS) that are developed by the European Financial Reporting Advisory Group (EFRAG).
FIEC position on the latest draft delegated act can be found HERE.
All FIEC Position Papers are available here.