How the EU’s Taxonomy and sustainable finance framework are helping financial and non-financial actors transition to net zero. January 2024

he objective of this report is to consider how the EU sustainable finance framework can be used to support and inform the transition efforts of economic actors, beyond mere regulatory compliance. It presents a compendium of early practices, financial products, instruments and initiatives that market participants are employing to transition their business models and investments. Companies made encouraging initial disclosures in 2023, for example in sectors such as utilities and real estate, demonstrating that capital expenditures associated with the EU Taxonomy can inform the transition of key economic activities.1 The findings in this report build on the European Commission’s 2023 Recommendations on Transition Finance, the 2023 EU Communication ‘A sustainable finance framework that works on the ground’, as well as on the 2022 Platform on Sustainable Finance (PSF) data and usability report. They reflect on the evolution of the EU’s sustainable f inance agenda in recent years, one that has shifted from a focus on promoting transparency, standards and clarity around investor duties to a more holistic and inclusive approach. As the EU concludes a political cycle and starts planning for the work of the next European Commission, it is crucial that the EU’s sustainable finance framework can demonstrate how it supports, encourages and enables market participants and the wider f inancial system to meet the EU’s climate and environmental goals under the Green Deal. The market practices reflect the contributions of seven stakeholder groups, including large corporates, credit institutions, investors, insurers, public institutions, auditors and consultants, and SMEs (small and medium-sized enterprises). They also reflect the early stages of adoption of the EU sustainable finance framework and should not be interpreted as best practice or a ‘market standard’. Building on those, the seven stakeholder groups propose peer-to-peer recommendations and invite market actors to engage and share business and financial practices with the EU Platform on Sustainable Finance (PSF) on a regular basis to continue to enhance the value and benefits of the framework. Finally, the stock take process undertaken to produce this compendium suggests that the usability of the EU Taxonomy and wider framework needs to be further improved to fully support financial and non-financial actors in transitioning their business models to align with the EU’s sustainability objectives. This report presents key recommendations and priorities for the PSF’s future work in its advisory role to the European Commission. These derive from the market practices and observations made by the seven stakeholder groups, and build on those identified by the Platform in its previous work on data and usability.