EU Commissioner Mairead McGuinness this week participated in a meeting of the Copa Cogeca Praesidia, discussing upcoming changes to the EU Sustainable Finance policy and its impact on farmers and co-operatives.
The EU regulation on Financing Sustainable Investment (known as the taxonomy regulation) was entered into force in July this year. Its objective is to reorient capital flows towards sustainable investment in order to achieve sustainable and inclusive growth and does this through the establishment of a unified classification system for sustainable activities, i.e. determining which activities qualify as “green” or “sustainable” in order to allow them access to preferential finance terms. In this determination of sustainability, there is a focus only on environmental aspects (rather than also looking at economic and social sustainability). Agriculture and fisheries are the only sectors to have specific sectorial recommendations.
The Commission is now preparing to publish additional supplementary legislation laying out uniform technical screening criteria for determining whether economic activities contribute substantially to the six environmental objectives of the regulation: climate change mitigation; climate change adaption; sustainable and protection of water and marine resources; transition to a circular economy; pollution prevention and control; protection and restoration of biodiversity and eco-systems.
Concerns have been raised about the implications of the new rules on access to finance within the sector. From a farmer perspective, the delegated acts would require environmental actions above and beyond those implemented under the CAP. It is feared that such actions may be out of the reach of many commercial farmers and therefore could limit their ability to access more affordable finance in order to make further investments in sustainability.
From a co-operative perspective, finance would come with significant additional red tape, including need to meet with an additional layer of requirements, annual reporting and provision of a sustainability plan. Large parts of the EU bioeconomy also risk being excluded from the list of sustainable activities. This is despite the fact that their primary purpose is to produce, process and add value to renewable resources as feedstock in order to make innovative, value-added everyday products and materials. The draft delegated act refers to the uses of agricultural raw materials for industrial and energy applications, such as plastics, biofuels for transport, biowaste and organic chemicals. It states that a key criterion is that “Food or feed crops are not used as bio-based feedstock for the manufacture” of these bio-based products and ingredients.
Responding to these concerns, McGuinness stressed that this was not a mandatory framework and would not be applied to all future investment or finance requests. Rather the proposal is designed to reward the very best in class in sustainability, to investment voluntarily made in line with the EU Green Deal.
Touching on the upcoming Non-Financial Reporting Directive due next year, McGuinness stressed that no decision was yet made on the size of the companies which would fall within its scope. The directive, which will likely bring additional reporting requirements for some co-operatives, aims to put non-financial report on an equal footing to financial reporting and will include the introduction of new audit requirements.
Alison Graham – European Affairs Executive
28 May 2021