Legal & Regulatory News

EU Platform on Sustainable Finance releases its draft Taxonomy-Aligning Benchmarks Report

On 12 December 2023, the European Union Platform on Sustainable Finance released a draft report on a proposal for voluntary EU Taxonomy-Aligning Benchmarks. The call for feedback on the report is open until 13 March 2024.

The decision to introduce the Taxonomy-Aligning Benchmarks was influenced by the success of the EU Paris-Aligned Benchmarks (PABs). Companies within the PAB indices would be chosen, weighted and then aggregated to ensure that the aggregate was in line with the decarbonisation trajectory for limiting the global temperature increase to 1.5 degrees. The PABs therefore were intended to encourage companies to monitor the decarbonisation trajectory of their portfolios.

The Platform on Sustainable Finance defines a Taxonomy-Aligning Benchmark as:

“an investment benchmark that incorporates – next to financial investment objectives – specific objectives related to greening of CapEx, greenhouse gas (GHG) emission reductions in line with IPCC’s scientific evidence and the transition to a low-carbon economy through the selection and weighting of underlying constituents”.

The proposals for voluntary benchmarks include:

• EU TAB – this is intended for institutional investors who engage with fossil fuel companies, as the benchmark allows for greater diversification of assets.
• EU TABex – this benchmark includes stricter fossil fuel activity exclusion requirements.

The report includes a summary of minimum standards for EU TAB and EU TABex, including a commitment to increasing Taxonomy-aligned CapEx by at least 5 percentage points per annum.  The objective of the Taxonomy-Aligning Benchmarks is to incorporate the Taxonomy into climate and environmental benchmarks, by converting climate scenarios and Taxonomy objectives into portfolio construction methodologies.

Click here to read the press release.

Click here to read the draft report.