On April 5, the Commission published drafts of two delegated regulations. The first of these, the Environmental Delegated Act, will establish, through four annexes, Technical Qualification Criteria (TQC) for several dozen types of activities that contribute significantly to the four other environmental objectives (sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems). The second contains amendments to the so-called Climate Delegated Act, i.e., a set of TCCs for activities that contribute significantly to climate change mitigation and adaptation.
In 2022, the Platform on Sustainable Finance (PSF), a permanent advisory body set up by the European Commission, presented draft TKKs for activities related to four environmental objectives. However, it turned out that the draft presented by the Commission lacked criteria for several important industries highlighted by the PSF. The Platform's drafts included criteria for the furniture, food and beverage, clothing, and footwear industries. The Commission did not explain why it did not follow the Platform's recommendations.
The consultation announced by the Commission is very short and ends on May 3. At MATERIALITY, we are currently working on our response, which we plan to send to the Commission. We believe that not including these few important industries will significantly harm the companies operating in them. They will not be able to demonstrate the extent to which their activities are financially sustainable. Since there will be no criteria for them, these companies will also be unable to prove to financial institutions that they are making capital investments to become more sustainable. This, in turn, will effectively cut off companies in these sectors from access to sustainable financing, which, after all, accounts for an increasing share of the financial market.
There is another aspect to the failure to take the PSF's recommendations into account. The draft second delegated act includes criteria for types of activities that were not previously covered by the Platform's technical work, such as the aviation industry and aircraft leasing. The reasons for including these industries in the drafts and the source of the TCCs proposed for them have also not been explained by the Commission. The deviation from the procedure established by the regulation (the Platform develops draft TCCs, which are then adopted by the Commission after any amendments) is highly concerning.
If the Commission does not change its decisions, we will soon find ourselves in a situation where aircraft manufacturers or operators will enjoy the benefits of sustainable finance, while food producers, bottled beverages in returnable or durable bottles, and circular furniture will not only be cut off from sustainable finance, but will also find themselves in the same group as companies that generate energy from burning fossil fuels. I believe that these decisions can still be changed. That is why it is worth taking part in the consultations—all you need to do is express your opinion through the mechanism that is available here. Time is running out—consultations end on May 3!
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