The EU Sustainable Finance agenda
Sustainable Finance and the Chemical Industry
The European Commission published (March 2018) the EU Action Plan on Financing Sustainable Growth which proposes a suite of policy instruments designed to integrate sustainability considerations when making investment decisions in the financial sector.
Several landmark legislative proposals proposals – including the Taxonomy Regulation, the Sustainable Finance Disclosure Regulation, the Corporate Sustainability Reporting Directive, the Corporate Sustainability Due Diligence Directive, and work together to make the financial sector more sustainable by re-orienting investments towards sustainable technologies and businesses, by financing growth in a sustainable manner over the long-term, and by contributing to the creation of a low-carbon, climate resilient and circular economy. Although predating the publication of the European Green Deal, these initiatives serve to deliver on the EU’s ambitious environmental and climate ambitions.
“The private sector will be key to financing the green transition. Long-term signals are needed to direct financial and capital flows to green investment and to avoid stranded assets”
The chemical industry is essential to the European and global economy and the EU Sustainable Finance Agenda is an important policy area for Cefic membership. Transitioning the chemical industry towards climate neutrality and circularity, as well as developing safe and sustainable chemicals , will require major RD&I investments. Moreover, as the chemical industry possesses important physical assets, substantial investments are needed to retrofit them.
The development of a common language, such as in the case of the EU Taxonomy and Safe and Sustainable by Design (SSbD) framework, could promote informed decision-making to foster investment in environmentally sustainable activities and technologies. Reliable, comparable, and relevant information will bring clarity and transparency o environmental sustainability to investors, companies and issuers.
Cefic positions on key dossiers
Further to the publication of several legislative initiatives aiming to finance sustainable growth, below are Cefic positions key dossiers:
1. Taxonomy Regulation
Cefic supports the European Green Deal and Europe’s ambition to become climate neutral by 2050. Following the EU Industrial Strategy and the Chemicals Strategy for Sustainability, the transition towards a society that is climate neutral, circular and sustainable will require new technologies. This also means investment streams and innovation potential play a pivotal role.
Creating a common framework and language (EU Taxonomy) enables informed decision-making to foster investment towards activities and technologies that are environmentally sustainable, and we support European Commission’s efforts to bring clarity and transparency on environmental sustainability to investors, companies and issuers.
However, the chemical sector does not stand in isolation: it is integrated in complex and interconnected value chains, which can be impacted by the transformation occurring in our sector. Moreover, the chemical industry is a capital-intensive sector requiring a long lead-time and heavily dependent on a level-playing field with the right economic incentives.
Companies will need adequate flexibility to incorporate the EU Taxonomy into business models. The EU Taxonomy must be fair and incentivize companies to contribute to the transition journey, while avoiding penalizing those that have not yet reached the finishing line. Today, the EU Taxonomy is still a direction of travel and not the final destination.
Cefic notes that implementing the EU Taxonomy is not a linear process and will require a supportive and well-designed regulatory framework that minimizes uncertainty, ensures comparability and safeguards competitiveness.
Cefic position on Taxonomy Regulation
Cefic views on the EU Taxonomy and transition financing (19 March 2021)
Cefic contribution to legislative processes
- Cefic view on the draft Delegated Acts on the four remaining environmental objectives of the EU Taxonomy Regulation and amendments to the Climate Delegated Act (May 2023)
- Cefic views on the Commission draft Delegated Act on the obligation for certain companies to publish non-financial information (2 June 2021)
- Cefic views on the Commission draft Delegated Act on the first two environmental objectives of the EU Taxonomy Regulation (17 December 2020)
- Cefic response to the inception impact assessment on taxonomy-related disclosure (08 September 2020)
- Cefic response to inception impact assessment on the first two taxonomy delegated acts (17 April 2020)
2. Corporate Sustainability Reporting Directive
With the publication of the proposed Corporate Sustainability Reporting Directive (CSRD), Cefic welcomes further development of the EU Sustainable Finance Agenda. Reliable, comparable and relevant information on companies’ exposure to sustainability risks will enable informed decision-making that fosters investment in economic activities contributing to the socially just and sustainable economic transition.
Building on Cefic contributions to the EU Sustainable Finance Agenda and conclusions reached by similar entities, and with reference to the CSRD proposal.
Cefic recommends the following:
- Adequate flexibility for undertakings to adjust to changing reporting obligations
- Coherence with existing reporting requirements/upcoming initiatives and consideration of international circumstances
- Clarity of reporting requirements and key definitions
Cefic position on Corporate Sustainability Reporting Directive
Cefic views on the European Commission proposal for a Corporate Sustainability Reporting Directive
3. Corporate Sustainability Due Diligence
As recognized by the EU proposal on Corporate Sustainability Due Diligence (CS3D), EU companies operate in complex value chains and a growing number of those companies are voluntarily using “value chain due diligence” to identify adverse risks and build resilience.
The Commission Proposal (February 2022) identifies that voluntary actions have not resulted in substantial improvement of due diligence across sectors and seeks to address the harmonization challenges stemming from individual Member State actions.
Ultimately, the objective of this initiative should not be to create new substantive standards for companies, but to distinguish which are considered critical and request company compliance and due diligence to ensure them.
Cefic stresses the importance of:
- coherence and consistency with existing and forthcoming reporting requirements,
- measures and definitions set out in related legislation and international standards.
Failure to streamline regulatory reporting frameworks leads to overlapping, potentially inconsistent or contradictory legislation which may result in non-value adding or duplicative obligations on companies.