In January 2021, the European Commission asked the EU Platform on Sustainable Finance Platform to provide advice on transition financing. The Commission identified that more work is needed on how the Taxonomy can enable inclusive transition financing for companies and other economic actors working to improve their environmental impact. In this context, the EU Platform on Sustainable Finance Platform has issued in March 2021 the “Transition Finance Report”.

The concept of transition is relevant to all of the environmental objectives in the Taxonomy. However, the immediate priority is the finalisation of the first Taxonomy Delegated Act, which pertains to climate change mitigation and adaptation. For this reason, this report focusses primarily on transition in the context of climate change.

This report sets out the Platform’s key findings and recommendations, by responding to the following six questions from the Commission:

  1. Can the current EU taxonomy framework be used to provide greater support for attracting capital for the transition of companies towards “sustainable” activities, including in ways not yet proposed by the Commission and if so in which ways?
  2. Can the EU taxonomy framework support finance for companies undertaking activities that do not yet meet, or may be unable to meet, the substantial contribution criteria? And how can this be done?
  3. Can the current EU Taxonomy framework support finance for companies active in sectors that are not covered in the Taxonomy Regulation’s Delegated Act?
  4. How does the use of key terminology such as “sustainable”, “green” and “harmful” compare across the taxonomy framework and other relevant sustainable finance frameworks and how can it be clarified and harmonised?
  5. What further avenues could be explored to enable financing the transition through development of the taxonomy framework and beyond?
  6. Can we clearly address the concerns that the taxonomy will be used to prevent financing of transitional activities, while at the same time ensuring that we are not facilitating “green-washing”?

Access the full Transition Finance Report here.