EU Taxonomy

Dear President von der Leyen, First Vice President Timmermans, Executive Vice President Dombrovskis, Commissioner McGuinness, Commissioner Wojciechowski, Commissioner Sinkevičius, 

Re: EU Sustainable Finance Taxonomy 

We, the undersigned group of investors, investor representatives, and advisors, representing over $3.5 trillion in assets, welcome the steps the EU has taken over the past years on bringing sustainable finance to the forefront of the EU’s legislative agenda. The EU has become the global leader and we are encouraged to see the EU supporting progress in other markets that may have been slower at prioritising sustainable finance. In this light, we are keen that the EU maintains its leadership position, developing strong and sustainable policies that deliver the change at the speed required. Accordingly, we want to express our concern over certain elements of the EU Taxonomy ahead of planned upcoming Delegated Acts. 

We have three general concerns, and three specific concerns on agriculture, as outlined below. The EU Taxonomy aims to identify economic activities that make a substantial contribution to the Green Deal objectives. As investors, we recognise the crucial role private capital plays in achieving the European Green Deal. Within that context, we have three general points that we wish to raise with regards to the EU Taxonomy: 

1. Building on the original science-based recommendations of the Technical Expert Group (TEG) the upcoming Delegated Acts should follow a similar science-based framework to ensure that harmful or emissions intensive practices are not inadvertently categorised as ‘sustainable.’ This will ensure the robustness of the EU Taxonomy. 

2. The EU Taxonomy screening criteria must limit global warming to 1.5°C and be aligned with the Paris Agreement. The Taxonomy was designed as a classification system to help scale up investment in green projects. Therefore, it is essential that the technical screening criteria do not undermine the objectives of global climate and biodiversity agreements, and ultimately the overarching aims of the EU Green Deal. 

3. We want to reiterate that the EU Taxonomy and upcoming delegated acts should ensure the disclosure of information on how non-financial companies’ activities align with each relevant environmental objective (eg. water, biodiversity), in order to provide sufficiently granular information for investors. With respect to agriculture specifically: 

4. We are concerned that industrial livestock production may be classified as ‘green’ in the Taxonomy without sufficient consideration of multiple ESG risks. Food production is responsible for a quarter of all greenhouse gas (GHG) emissions which are a significant contributor to climate change. Intensively reared livestock has extensive adverse impacts on GHG emissions, biodiversity, water use and antimicrobial resistance, as well as causing eutrophication and soil degradation: it should not be included in the EU Taxonomy as it stands. In addition, there is a need for the European Commission to provide guidance on further sectoral roadmaps for 1 https://ec.europa.eu/commission/presscorner/detail/e%20n/qanda_21_1805 agriculture to align with a 1.5C pathway, which would enable the EU Taxonomy guidance to be as robust as possible. 

5. The EU Taxonomy should consider the importance of organic and agro-ecological farming methods. Organic farming has not yet featured in the Taxonomy to date. Given that the EU has set a target for organic farming to constitute 25% of all agricultural land by 2030, the Taxonomy technical screening criteria should reflect this goal. It should also consider innovative systems such as agro-ecological and integrated crop-livestock systems, as well as systems on well-managed extensive permanent grassland. 

6. The ‘Do no significant harm’ (DNSH) criteria must consider antibiotics and animal welfare. Currently, antibiotics and animal welfare risks are not part of the scope of ‘do no significant harm’ (DNSH) criteria. These risks need to be considered. The EU Technical Expert Group (TEG) noted that animal welfare and antibiotic use did not fall under the environmental goals prioritised at the time, however the TEG recommended to the Platform that “criteria addressing animal welfare and health are integrated at the earliest possible date”. 

In summary, it is paramount that criteria in the EU Taxonomy are science-based and aligned with existing climate and biodiversity goals. Investors are concerned about safeguarding the long-term value of their investments, particularly in the face of increasingly material climate and biodiversity risks. Moreover, we recognise that the EU Taxonomy will have significant influence as other developing EU legislative frameworks and strategies will refer to the Taxonomy. It will be important to ensure that the final EU Taxonomy does not lock the EU into carbon-intensive pathways, amplifying material financial risk across sectors due to climate change impacts. We hope you will consider these recommendations when finalising the EU Taxonomy Delegated Acts. 

Yours sincerely,