- What criteria must an activity meet to qualify as an environmentally sustainable activity?
An environmentally sustainable activity is one that meets the following criteria together:
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- makes a significant contribution to one or more of the environmental objectives (climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a closed-loop economy, pollution prevention and control, protection and restoration of biodiversity and ecosystems) pursuant to Articles 10-16 of Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on establishing a framework to facilitate sustainable investment, amending Regulation (EU) 2019/2088 (the “EU Taxonomy“);
- does no signficant harm (DNSH) to any environmental objective, according to Article 17 of the EU Taxonomy;
- is conducted in accordance with the minimum guarantees set forth in Article 18 of the EU Taxonomy (respect for principles and rights at work and human rights); and
- meets the technical eligibility criteria established by the Commission under the relevant provisions of the EU Taxonomy (Commission delegated acts, including Delegated Regulations 2021/2139, with an amending draft under way, and a draft Commission delegated act for the remaining 4 of the 6 environmental objectives is also available). [concerning]
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2 What is green washing and green bleaching?
Green washing (so-called “pseudo green marketing”), as defined in Recital 11 of the EU Taxonomy, means the practice of gaining an unfair competitive advantage by marketing a financial product as environmentally friendly, when in fact basic environmental standards have not been met. In addition, in the Communication from the Commission to the European Parliament pursuant to Article 294(6) of the Treaty on the Functioning of the European Union concerning the Council’s position on the adoption of the Regulation of the European Parliament and of the Council on the establishment of a framework to facilitate sustainable investment 2018/0178 (COD), and on the amendment of the SFDR, the Commission indicated that “pseudo-environmental marketing” refers to the practice of promoting an organization’s products, objectives or strategies as environmentally friendly, when they probably are not.
We will not find a legal definition of green bleaching in the regulations governing sustainable development, as well as in the guidelines and soft recommendations in this area. It denotes a situation in which a product may meet the criteria for a sustainable financial product, but is deliberately not qualified as a sustainable financial product, in order to avoid extensive assessment and disclosure, both under the SFDR and the EU Taxonomy . Green bleaching practices also include the omission of reporting on investments that are sustainable in nature in order to avoid disclosure and reporting obligations on such investments, or also the complete cessation of investments in sustainable activities due to regulatory obligations related thereto.
3 Whether product disclosure obligations will apply to existing contracts entered into before the SFDR came into force
The product disclosures provided for in the SFDR essentially cover pre-contractual disclosures (we are talking about disclosures under Articles 6 – 9 of the SFDR). For obvious reasons, they will not be applicable to existing contracts for financial products under the SFDR, due to the impossibility of fulfilling them after the conclusion of the contract. Other product disclosures made through publication on the website and in the periodic report on the grounds of Articles 10 – 11 of the SFDR will apply to existing contracts, in accordance with the effective dates of the respective obligations under Article 20(3) of the SFDR.
