WEBVTT - How New EU Sustainability Disclosure Rules Will Affect Companies 0:00:00.120 --> 0:00:02.680 Hi, I'm Dana Perkins and you're listening to Switch It 0:00:02.759 --> 0:00:06.560 on the b n F podcast. So what is a taxonomy? Well, 0:00:06.600 --> 0:00:09.640 what immediately comes to mind our species and some of 0:00:09.680 --> 0:00:12.119 the stuff I learned in my high school science class, 0:00:12.280 --> 0:00:14.280 or maybe some of the stuff that we find out 0:00:14.280 --> 0:00:17.720 about when watching a documentary by David Attenborough. So when 0:00:17.760 --> 0:00:21.360 we talk about the EU Taxonomy for Sustainable Activities, what 0:00:21.440 --> 0:00:23.720 I'm thinking is that there must be an awful lot 0:00:23.760 --> 0:00:27.200 of stuff that needs to be classified and this taxonomy 0:00:27.240 --> 0:00:29.240 will help us do it. So if you want to 0:00:29.280 --> 0:00:31.600 actually know what it is, Mark Taylor and I have 0:00:31.680 --> 0:00:34.640 sat down with Maya Gottamer, who is an analyst researching 0:00:34.680 --> 0:00:37.640 sustainable finance for BENF and she's going to talk to 0:00:37.720 --> 0:00:40.800 us about this EU taxonomy. If you're in finance and 0:00:40.840 --> 0:00:43.560 you're focused on environmental, social and governance issues or e 0:00:43.720 --> 0:00:46.040 s G, you likely know what this is, as there 0:00:46.120 --> 0:00:48.560 has been quite a buzz the past couple of years 0:00:48.640 --> 0:00:51.320 and it's all really coming together now with a deadline 0:00:51.320 --> 0:00:54.760 approaching in twenty two. But if you're not, you might 0:00:54.800 --> 0:00:57.160 be left wondering what was it designed to do and 0:00:57.200 --> 0:01:01.040 how might it impact business and finance. Well, Maya recently 0:01:01.040 --> 0:01:04.640 wrote a research piece titled EU Taxonomy, How to Prepare 0:01:04.680 --> 0:01:07.959 your reporting for two And if that's a bit advanced 0:01:08.000 --> 0:01:09.959 and you're thinking what is going on with all of 0:01:09.959 --> 0:01:12.200 the E s G terminology, you can go back to 0:01:12.240 --> 0:01:15.840 a primer that Kyle Harrison wrote last year titled Shifting 0:01:15.880 --> 0:01:19.320 through the Corporate Sustainability Alphabet soup. These are both available 0:01:19.360 --> 0:01:21.640 on b NF dot com via our mobile app, or 0:01:21.760 --> 0:01:25.040 for terminal subscribers at b NF Go. Now, Nope, b 0:01:25.160 --> 0:01:27.560 NF does not provide investment of strategy advice, and we 0:01:27.640 --> 0:01:30.000 always have a full disclaimer at the end of the show. 0:01:30.280 --> 0:01:33.520 And for now, let's join Mark Taylor and Maya Gottomer 0:01:33.600 --> 0:01:42.880 for today's discussion on the EU Taxonomy. Maya, thanks for 0:01:43.000 --> 0:01:46.119 joining us. You're welcome. So today we're going to talk 0:01:46.160 --> 0:01:49.200 about the EU taxonomy. Now, this is something that governs 0:01:49.320 --> 0:01:52.560 things that are considered a sustainable activity by a company, 0:01:53.120 --> 0:01:54.840 and Maya is going to tell us all about it. 0:01:54.920 --> 0:01:57.960 So Maya, let's start off with what was the taxonomy 0:01:58.000 --> 0:02:01.080 hoping to achieve and really what problems where they trying 0:02:01.120 --> 0:02:03.480 to solve when they originally set it up. Basically, the 0:02:03.480 --> 0:02:06.640 taxonomy is part of a bigger action plan that was 0:02:06.680 --> 0:02:09.120 set up by the European Commission. It was back in 0:02:09.360 --> 0:02:12.880 two thousand and eighteen, after assigning of the Paris Agreement 0:02:13.120 --> 0:02:15.919 a bit before. Basically they set up an action plan 0:02:16.000 --> 0:02:19.519 on sustainable finance and what they really wanted to do 0:02:19.720 --> 0:02:24.840 is that having a strong way to define what we 0:02:24.880 --> 0:02:28.600 would call a sustainable investment in the European Union and 0:02:28.680 --> 0:02:35.639 to foster investment towards sustainable activities, sustainable projects and really 0:02:35.800 --> 0:02:39.480 use finance as a tool to transition. So that was 0:02:39.560 --> 0:02:41.400 what it was done at the beginning, is still to 0:02:41.520 --> 0:02:46.320 foster green investment because it's an UNREA mentally sustainable activity. 0:02:46.600 --> 0:02:50.000 So there are a lot of existing reporting frameworks for 0:02:50.040 --> 0:02:52.760 those people who want to support on various E s 0:02:52.800 --> 0:02:55.000 G metrics. So today we're going to focus in I 0:02:55.000 --> 0:02:56.960 think on the E part. What were they lacking that 0:02:57.000 --> 0:03:00.480 there was a need for this taxonomy to come into place. First, 0:03:00.480 --> 0:03:04.160 they were volunteering. We saw TCFD which brought a lot 0:03:04.200 --> 0:03:07.240 of people on board which we were not expecting. To 0:03:07.400 --> 0:03:10.960 jump on the bandwagon of East disclosure and in particularly 0:03:11.520 --> 0:03:15.120 climate risk disclosure. You had says by g r I. 0:03:15.560 --> 0:03:18.120 But the problem is that you had too many now 0:03:18.240 --> 0:03:22.120 standardization and the goal of the taxonomy is was to 0:03:22.320 --> 0:03:26.200 build a common classification of what we call green in 0:03:26.240 --> 0:03:30.200 the European Union. So the goal was to have this classification. 0:03:30.360 --> 0:03:33.160 It would be a bed rock for future regulations, so 0:03:33.840 --> 0:03:37.200 regulation they can reach out to when they need to 0:03:37.240 --> 0:03:41.760 define sustainability and ron mentally sustainable activities in the European Union. 0:03:42.200 --> 0:03:48.600 This one was built by a combination of market participants, scientists, 0:03:48.960 --> 0:03:52.880 people who really know the industries. So the goal was 0:03:52.960 --> 0:03:56.600 to have a classification of how an activity could be 0:03:56.880 --> 0:04:01.440 under mentally sustainable in a way that it aligns its 0:04:01.480 --> 0:04:05.840 activity with the goal of the Parish Agreement. So normally 0:04:06.280 --> 0:04:11.400 the Youth Taxonomy is basically defining itself as being science 0:04:11.440 --> 0:04:17.000 based to reach net zero by and to reach alignment 0:04:17.000 --> 0:04:19.799 with Paris Agreement. Last time we had you on the show, 0:04:20.120 --> 0:04:23.440 you mentioned that the taxonomy was coming. You know that 0:04:23.480 --> 0:04:25.479 it was going to be starting to be put in 0:04:25.480 --> 0:04:27.880 place in the near future. Why are we talking about 0:04:27.880 --> 0:04:29.719 it now? What has happened since a few months ago 0:04:29.839 --> 0:04:32.040 to make this a hot topic right now? What happened 0:04:32.080 --> 0:04:34.960 is that in the European Union it's a bit more 0:04:35.000 --> 0:04:37.599 complicated to pass a law. As you may all know, 0:04:38.320 --> 0:04:41.719 you need to reach agreement between the Council of Europe, 0:04:41.880 --> 0:04:46.160 the European Commission, European Parliament. So what happened is that 0:04:46.200 --> 0:04:50.400 the taxonomy was in the pipeline. Back in the European 0:04:50.440 --> 0:04:54.520 Commission designated what they called a technical expert group, which 0:04:54.640 --> 0:05:00.000 was this group of scientists and geo's market participants, corporate 0:05:00.080 --> 0:05:05.359 it's regulators that would work on the taxonomy standard. And 0:05:05.400 --> 0:05:09.719 it took them a few iteration and report to finally 0:05:09.800 --> 0:05:14.560 come with their latest report back in March, and they 0:05:14.680 --> 0:05:17.560 put this report to the Commission. The Commission had to 0:05:17.600 --> 0:05:23.320 review it, and then in July what happened is that 0:05:23.760 --> 0:05:29.280 the taxonomy regulation finally was published at the official Journal 0:05:29.600 --> 0:05:33.320 of the European Union and it entered into force in July. 0:05:34.160 --> 0:05:36.400 When I said the taxonomy enters into force, it means 0:05:36.440 --> 0:05:40.279 that a very high level text, which means that the 0:05:40.320 --> 0:05:45.880 Council of Europe, the European Parliament and the European Commission 0:05:46.160 --> 0:05:51.039 have agreed basically on the highest level of the regulation. 0:05:51.160 --> 0:05:54.240 They've agreed on that it needs to be put in place, 0:05:54.839 --> 0:05:57.120 that it's going to happen that type of thing exactly. 0:05:57.240 --> 0:06:00.960 But then what happened is that in November we actually 0:06:01.000 --> 0:06:05.120 had the implementation guidelines from the European Union saying, if 0:06:05.120 --> 0:06:08.040 you're a cement manufacturer, this is exactly what you need 0:06:08.080 --> 0:06:10.040 to do if you want to be aligned with the taxonomy. 0:06:10.120 --> 0:06:12.320 That it is too like what types of companies doesn't 0:06:12.320 --> 0:06:15.440 apply to you? Semented, cement, who else? It's super broad. 0:06:15.520 --> 0:06:18.920 In the latest report that we saw in March before 0:06:18.960 --> 0:06:22.520 it became official from the European Commission, we had I 0:06:22.560 --> 0:06:33.360 think about seventies seven, yes, seventy activities covered, ranging from manufacturing, industry, 0:06:33.400 --> 0:06:37.680 service provider, energy utilities. That sounds like a lot. Is 0:06:37.680 --> 0:06:40.680 that a lot? Seventy seventy It's kind of a lot. 0:06:40.720 --> 0:06:43.560 But at the same time you can imagine like clothes 0:06:43.640 --> 0:06:48.960 retailer were not covered, food retailer were not covered, but aforestation, 0:06:49.560 --> 0:06:53.160 food production like really commodities level were covered. And they 0:06:53.240 --> 0:06:56.719 expanded the number of activities that were covered by the 0:06:56.800 --> 0:07:02.480 taxonomy in the latest text in November, where even research 0:07:02.880 --> 0:07:07.520 are academics were covered by the taxonomy. Some activities are 0:07:07.560 --> 0:07:10.640 not even covered by the taxonomy because the European Commission 0:07:10.800 --> 0:07:14.120 it judges that in any case it can never claim 0:07:14.200 --> 0:07:19.280 to be environmentally sustainable in any shape of form, for instance, 0:07:19.840 --> 0:07:25.560 oil production, nuclear power generation. You will have some activities 0:07:25.600 --> 0:07:28.000 that will never be covered by the taxonomy. If you're 0:07:28.000 --> 0:07:30.760 a company that falls into one of the named industries 0:07:30.800 --> 0:07:34.760 by the European Commission, then you must comply with this 0:07:34.880 --> 0:07:37.760 if you want to be considered as a sustainable business 0:07:38.000 --> 0:07:41.400 or is this for absolutely all of the companies and industries, 0:07:41.440 --> 0:07:43.240 and that's something you have to do if you just 0:07:43.320 --> 0:07:46.280 want to have a business in the European Union. So 0:07:46.880 --> 0:07:52.880 the taxonomy lists all the industries that are eligible to 0:07:53.120 --> 0:07:56.960 claim that they can be environmentally sustainable, so we call 0:07:57.000 --> 0:08:00.800 it like eligibility to the taxonomy. And then after if 0:08:00.840 --> 0:08:04.360 you really want to prove that you're unvironmentally sustainable, the 0:08:04.440 --> 0:08:08.840 taxonomy will say, okay, let's say I'm a cement manufacturer. 0:08:09.320 --> 0:08:13.160 How do I prove that the way I produce cement 0:08:13.640 --> 0:08:18.160 is actually unvironmentally sustainable? So the taxonomy has laid out 0:08:18.520 --> 0:08:22.760 the different we call it technical screening, So it has 0:08:22.840 --> 0:08:26.040 laid out some tests that you need to perform on 0:08:26.200 --> 0:08:30.720 your plans to prove that your plans, for instance, produces 0:08:30.720 --> 0:08:36.320 cement under a certain level of greenhouse gas emission. It 0:08:36.400 --> 0:08:39.480 protects water and everything. So that's the first thing. So 0:08:39.600 --> 0:08:42.600 that's the way you can prove that you're unvironmentally sustainable. 0:08:43.480 --> 0:08:47.320 But not everyone has a mondatory report around its taxonomy alignment. 0:08:47.800 --> 0:08:53.320 Why everyone is now under pressing deadline about understanding what 0:08:53.520 --> 0:08:56.800 is the taxonomy? How do you prove your unvironmentally sustainable? 0:08:57.040 --> 0:09:01.240 Why is everyone caring about it suddenly right now? While honestly, 0:09:01.320 --> 0:09:03.360 Dana and Mark, you know how much I've been like 0:09:03.480 --> 0:09:07.400 talking about this since I've joined BENF. It's because as 0:09:07.400 --> 0:09:13.760 of January two, all large listed companies in Europe that 0:09:13.800 --> 0:09:18.920 are employing more than five hundred employees in Europe will 0:09:19.040 --> 0:09:23.560 have to disclose how much of their turnover capex and 0:09:23.640 --> 0:09:29.160 opex is generated or invested in activities that are aligned 0:09:29.200 --> 0:09:33.080 with the taxonomy. So basically, how much of your revenue 0:09:33.720 --> 0:09:37.800 is generated from green activities as of January two on 0:09:37.960 --> 0:09:42.480 operation of one so basically the current year. And as 0:09:42.520 --> 0:09:47.240 of January twenty two, asset manager who are claiming that 0:09:47.280 --> 0:09:51.439 they have an e s G so environmentally social or 0:09:51.600 --> 0:09:56.200 governance fund or sustainable fund, all those asset managers in 0:09:56.240 --> 0:10:00.200 the European Union will have to disclose the percentage of 0:10:00.280 --> 0:10:03.800 their fund that is aligned with the taxonomy. This is 0:10:03.800 --> 0:10:06.400 why everyone is freaking out. So this applies to funds 0:10:06.440 --> 0:10:09.679 that are located in Europe, and I'm looking at the calendar, okay, 0:10:09.679 --> 0:10:14.960 so we're barely into and for anybody who's listening before, 0:10:15.160 --> 0:10:18.440 we are located in London. So I'm gonna ask the 0:10:18.520 --> 0:10:21.080 question the elephant in the room Brexit. What does that 0:10:21.160 --> 0:10:26.000 mean for all of the investors that are located in London. 0:10:26.400 --> 0:10:29.000 So it's not only for the fund that are located 0:10:29.000 --> 0:10:32.520 in the European Union, is for everyone who is marketing 0:10:33.120 --> 0:10:38.480 or advertising selling an e s G are sustainable fund 0:10:38.600 --> 0:10:41.240 in Europe. So it means that even if I'm black 0:10:41.360 --> 0:10:44.160 Rock and I'm selling an e s G fund in 0:10:44.200 --> 0:10:48.080 Europe to European clients, I'll fall into the scope of 0:10:48.120 --> 0:10:51.320 the taxonomy. So Brexit doesn't affect it. One thing that 0:10:51.360 --> 0:10:56.000 Brexit is doing is that the UK is now currently 0:10:56.480 --> 0:10:59.520 discussing its own taxonomy. But that's not the only country 0:10:59.520 --> 0:11:02.520 doing that. She so I'm a little bit confused. So 0:11:04.040 --> 0:11:08.240 Deadline all listed companies above five employees, But is that 0:11:08.400 --> 0:11:12.440 only also within the seventy covered activities will clothing retailers 0:11:12.440 --> 0:11:14.439 be covered? At that point? Or not. Yes, they will 0:11:14.480 --> 0:11:18.720 be covered. And basically either they say that they are 0:11:18.800 --> 0:11:22.480 not covered by the taxonomy or if I am e 0:11:22.640 --> 0:11:27.120 d F and I have my whole nuclear business line. 0:11:27.320 --> 0:11:29.959 In the case of e d F, they just can't 0:11:29.960 --> 0:11:34.080 claim that they can be in any way environmentally sustainable 0:11:34.160 --> 0:11:37.480 for their nuclear business line. But however, the d F 0:11:37.640 --> 0:11:41.800 is also generating electricity from hydropower, so that counts. If 0:11:41.800 --> 0:11:44.440 they can pass the threshold, they will be able to 0:11:44.640 --> 0:11:48.280 basically claim taxonomy alignment. Is there anything like this anywhere 0:11:48.280 --> 0:11:51.320 else in the world. There is nothing like this anywhere 0:11:51.360 --> 0:11:54.679 else in the world. The more I'm talking with regulators 0:11:54.840 --> 0:11:59.160 and with central bankers, they are waiting for the European 0:11:59.240 --> 0:12:03.760 Union to put this taxonomy out because it's a massive 0:12:04.160 --> 0:12:07.400 game changer. It's going to be something big. It's going 0:12:07.440 --> 0:12:11.560 to be something that can really revolutionize the way we 0:12:11.679 --> 0:12:18.880 consider environmentally sustainable activities sustainable finance. So I heard central 0:12:18.880 --> 0:12:22.480 bankers and other regulators thinking about creating their own taxonomy. 0:12:22.520 --> 0:12:25.920 Is For instance, the Hong Kong Steering Group has announced 0:12:26.080 --> 0:12:29.920 last year that they will work on their own taxonomy. 0:12:30.080 --> 0:12:34.400 The UK has said so. It's been also mentioned in Canada. 0:12:35.040 --> 0:12:37.440 The big question will be, for instance, if I'm the 0:12:37.440 --> 0:12:41.440 Canadian government, it's going to be very difficult to to 0:12:41.600 --> 0:12:45.920 completely exclude oil and gas from my taxonomy. So the 0:12:46.280 --> 0:12:49.440 question will be to try to understand if they will 0:12:49.679 --> 0:12:54.520 try to integrate those business activities that are so big 0:12:54.559 --> 0:12:59.000 for for the country but have like very difficult freshold 0:12:59.000 --> 0:13:02.280 to each or if they're just going to exclude it. 0:13:02.320 --> 0:13:05.480 The same with the European Union has done it. Guesses included, 0:13:05.600 --> 0:13:09.080 but under very very strict thresholds. If you don't do 0:13:09.120 --> 0:13:11.920 buy a guess, you'll probably never meet those freshold. Bikes. 0:13:12.000 --> 0:13:13.720 This is a club that you want to be in, though, 0:13:13.880 --> 0:13:17.760 So if you're doing stuff that's not included in theory, 0:13:18.040 --> 0:13:20.199 you're not very happy about that because you want to 0:13:20.240 --> 0:13:22.400 be able to position yourself in this way. Or is 0:13:22.440 --> 0:13:26.280 this instead something where if you are called out and 0:13:26.360 --> 0:13:28.960 you're one of them, you're thinking, oh, this is another 0:13:29.000 --> 0:13:31.400 thing I'm going to have to do. I have to 0:13:31.440 --> 0:13:35.160 comply in order to keep those in the financial community happy. 0:13:35.320 --> 0:13:38.520 Like for some of those companies, they just will have 0:13:38.600 --> 0:13:43.080 to comply. And we've seen so far three public reporting 0:13:43.320 --> 0:13:47.480 of taxonomy alignment. One of them was Ana and the 0:13:47.559 --> 0:13:52.280 second one was Speed which is a least known company. 0:13:52.320 --> 0:13:58.240 It's basically an engineering company for network energy and they've 0:13:58.280 --> 0:14:02.559 done their taxonomy reporting. So for actually now working mostly 0:14:02.600 --> 0:14:05.080 in renewables, it was not so much of a challenge. 0:14:05.480 --> 0:14:08.080 But for Speed, for instance, it was much more of 0:14:08.080 --> 0:14:11.240 a challenge because they are also servicing oil and gas 0:14:11.240 --> 0:14:15.480 and and all sorts of different companies. You want to 0:14:15.520 --> 0:14:18.840 be I mean as a as a country, you don't 0:14:18.840 --> 0:14:23.600 want to be a lagger, so you you will have 0:14:23.720 --> 0:14:27.560 to implement something similar to the taxonomy in your own country. 0:14:27.600 --> 0:14:32.280 Because the taxonomy is addressing the threat of greenwashing. It's 0:14:32.320 --> 0:14:37.160 addressing the threat of everyone claiming that they are sustainable. 0:14:37.560 --> 0:14:40.720 The taxonomy is nothing less than you know, when we 0:14:40.760 --> 0:14:45.040 started to talk about organic product and you used to 0:14:45.080 --> 0:14:49.560 go to Tesco or sainsbury and seeing everyone calling their 0:14:49.600 --> 0:14:53.520 product organic. We saw a whole range of lexical field 0:14:53.560 --> 0:14:56.440 being used. I struggle with that, by the way, as 0:14:56.440 --> 0:14:59.000 somebody who's looking for green products, I find it very 0:14:59.000 --> 0:15:02.640 frustrating what I've feel like I've been misled, exactly as 0:15:02.680 --> 0:15:05.920 someone who is investing in her pension, I'm sure you 0:15:06.000 --> 0:15:10.040 also find misleading that someone is pretending that a specific 0:15:10.120 --> 0:15:14.320 fund or exchange traded fund is sustainable, right, and then 0:15:14.360 --> 0:15:16.240 you open the fund and you see that maybe the 0:15:16.280 --> 0:15:19.760 fund is like partially invested in oil and gas. I 0:15:19.800 --> 0:15:22.920 find this frustrating as someone who has to choose to 0:15:23.040 --> 0:15:25.320 choose her a punch and fund. So what the taxonomy 0:15:25.360 --> 0:15:29.440 is enabling you to do is to understand, Okay, if 0:15:29.480 --> 0:15:33.040 I take this very strict framework, how much of my 0:15:33.120 --> 0:15:37.360 pension fund is actually invested in green activities? And if 0:15:37.400 --> 0:15:40.920 you're a company, most of them are also willing to 0:15:41.080 --> 0:15:45.880 appeal to those sustainable investor who are not on the 0:15:46.040 --> 0:15:50.600 niche investors anymore. The whole economy is in transition right now. 0:15:51.000 --> 0:15:53.600 Do you think they're going to add additional industry though, 0:15:53.600 --> 0:15:56.360 because you previously mentioned oil and gas, and you know, 0:15:56.440 --> 0:15:58.400 it's kind of easy to throw the baby out with 0:15:58.440 --> 0:16:02.040 the bathwater with that one. But there are several oil 0:16:02.120 --> 0:16:06.080 majors who out there making great strides to pivot their business. 0:16:06.120 --> 0:16:09.360 And what if my values based judgment is an investor says, 0:16:09.440 --> 0:16:11.040 you know what, I want to keep them in because 0:16:11.040 --> 0:16:14.480 they're transitioning, and another person says, no, I don't really 0:16:14.520 --> 0:16:18.160 want them in if they're not in there in the taxonomy, 0:16:18.160 --> 0:16:20.480 are we going to have the transparency that we need 0:16:20.520 --> 0:16:23.080 in order to make those values based judgments. One of 0:16:23.120 --> 0:16:26.760 the big criticism that the taxonomy has received it's that 0:16:27.040 --> 0:16:30.400 it's really black and white. It's really manichean. It's either 0:16:30.480 --> 0:16:34.000 you're in or you're out. You can't be transitioning. So 0:16:34.720 --> 0:16:38.840 I think that the same way Marcus was asking at 0:16:38.880 --> 0:16:41.880 the beginning, like if I'm a cloth retailer or I'm 0:16:41.880 --> 0:16:45.440 a cloth manufacturer, how can I claim that I'm environmentally 0:16:45.440 --> 0:16:48.320 sustainable those kind of cases, you could imagine a cloth 0:16:48.360 --> 0:16:53.560 manufacturer under certain threshold being able to produce garments in 0:16:53.600 --> 0:16:58.120 a sustainable manner, So those could be added. The technical 0:16:58.200 --> 0:17:02.400 expert group that was sta bleashed back in two thousand 0:17:02.480 --> 0:17:06.120 and eighteen to work on the taxonomy basically has been 0:17:06.160 --> 0:17:09.600 replaced by something called the Platform and Sustainable Finance, and 0:17:09.640 --> 0:17:12.840 that's gonna go on for another two years. You can 0:17:12.880 --> 0:17:15.520 reach out to them if you think that you can 0:17:15.600 --> 0:17:19.600 claim that you're environmentally sustainable and that you're not covered 0:17:19.960 --> 0:17:24.680 by the taxonomy, and then they can think about technical 0:17:24.720 --> 0:17:28.800 screening criteria like tests to actually prove that for your 0:17:28.840 --> 0:17:32.359 own activity. So that's the first thing. The second thing 0:17:32.359 --> 0:17:36.440 about the criticism around like for instance, oil and gas. Indeed, 0:17:36.760 --> 0:17:39.199 we've covered it as BENF actually that a lot of 0:17:39.240 --> 0:17:43.480 oil and gas companies are currently transitioning. But the reason 0:17:43.560 --> 0:17:46.679 why I think the taxonomy is still could appeal to 0:17:46.760 --> 0:17:49.040 them is that if you take the oil and gas 0:17:49.080 --> 0:17:54.840 companies like Shell or BP, which have made climate neutrality pledges, 0:17:55.200 --> 0:17:59.840 they've also started investing in renewable and they've started gen 0:18:00.119 --> 0:18:03.440 racing revenue from renewable. Now, for a very short break, 0:18:03.560 --> 0:18:09.800 stay with us. Can we go back to who's really 0:18:09.840 --> 0:18:12.080 pushing for this? As you're talking about it, I keep wondering, 0:18:12.200 --> 0:18:13.760 is it like the EU that it's trying to put 0:18:13.760 --> 0:18:15.960 a regulation in place to to make things more clear. 0:18:16.600 --> 0:18:20.879 Is it investors that want to have sustainable companies they 0:18:20.920 --> 0:18:23.199 can credibly call sustainable that they can invest in, or 0:18:23.240 --> 0:18:26.360 is it companies that want appear attractive to potential investors. 0:18:26.480 --> 0:18:30.280 I think this agenda was first pushed in retail investors 0:18:30.280 --> 0:18:34.080 and investors like us who are investing in pensions, who 0:18:34.160 --> 0:18:37.080 really wanted to know what is sustainable or not so 0:18:37.160 --> 0:18:40.400 pension funds. Who's going to be around in forty years? Right? Yeah, 0:18:40.440 --> 0:18:47.240 exactly and fifties About as far as any of us 0:18:47.280 --> 0:18:49.159 can look at right now. Well, unless you're China then 0:18:49.160 --> 0:18:53.600 it's twenty sixty, so forty years there. So it's been 0:18:53.680 --> 0:18:57.400 asked by investors because you want to have more transparency 0:18:57.680 --> 0:19:03.400 around sustainable statements, but it's been mostly pushed by regulators, 0:19:03.440 --> 0:19:08.320 like there is currently a consortium between the European Central 0:19:08.320 --> 0:19:13.120 Bank with Kristin Nagad and the European Commission with Lan. 0:19:13.600 --> 0:19:16.879 They're really pushing the climate agenda. I'm not sure it 0:19:16.920 --> 0:19:20.399 would have gone as quick if they were not both 0:19:20.480 --> 0:19:24.080 leading the European Commission and the European Central Banks. Let's 0:19:24.080 --> 0:19:26.639 be honest, okay, And who does it benefit most? So 0:19:26.720 --> 0:19:28.960 does it benefit the regulators from having the system in place, 0:19:29.040 --> 0:19:33.000 or investors or who it benefits? First retail investor. It 0:19:33.080 --> 0:19:38.760 benefits investors like us, not institutional investors, because we understand 0:19:38.800 --> 0:19:43.320 where we're putting our money. We understand there is real transparency, 0:19:43.480 --> 0:19:48.000 real accountability. We can't just claim to be sustainable. We 0:19:48.040 --> 0:19:51.960 can't just do climate pledges and not have something that 0:19:52.119 --> 0:19:56.800 follows really those statements. So it benefits us, but it 0:19:56.880 --> 0:20:01.720 benefits everyone overall. Because it was really interesting talking with 0:20:01.840 --> 0:20:04.399 the technical expert group and the platform, because I worked 0:20:04.400 --> 0:20:08.159 with them on this report. They were like, achieving carbon 0:20:08.240 --> 0:20:11.800 neutrality by is not going to be an easy task, 0:20:12.359 --> 0:20:15.240 and we need to find a way, a pathway to 0:20:15.320 --> 0:20:18.080 do that. And this is why we need to be 0:20:18.240 --> 0:20:24.080 really clear as the European Union, where we want money 0:20:24.240 --> 0:20:28.320 to go to achieve that goal. And this is who 0:20:28.359 --> 0:20:32.160 it's benefiting. So it's basically benefiting us in the future 0:20:32.200 --> 0:20:36.639 generations as well because finance should be used as a 0:20:36.720 --> 0:20:41.280 tool to achieve those goals. This is who it's benefiting, 0:20:41.640 --> 0:20:44.439 and it's bringing clarity to the market. So even if 0:20:44.480 --> 0:20:46.639 at the moment everyone is complaining about the fact that 0:20:46.640 --> 0:20:49.600 the taxonomy reporting will be a tough one to implement, 0:20:50.400 --> 0:20:53.880 this is why people are really complaining about it. It's 0:20:53.880 --> 0:20:56.440 benefiting all of us. Is there a dark side though, 0:20:56.840 --> 0:20:58.960 So let's let's get into that a little bit. So 0:20:59.440 --> 0:21:01.400 I would love, I would love to believe that it's 0:21:01.400 --> 0:21:03.399 benefiting all of us. So you say it's not easy, 0:21:03.720 --> 0:21:05.840 it's going to be tough to implement, the goals are 0:21:05.960 --> 0:21:08.879 super ambitious. What is the biggest frustration and all of this, 0:21:09.119 --> 0:21:11.439 and I guess I would couple that with like, is 0:21:11.440 --> 0:21:13.440 there a loophole? You know, is there a game stop? 0:21:13.480 --> 0:21:16.960 Style loophole that that could blow this all up. Well, 0:21:17.080 --> 0:21:19.960 I'm kind of biased because I think it's a great standard, 0:21:20.200 --> 0:21:22.639 so I need to say it out like before I 0:21:22.680 --> 0:21:27.600 answer out of like intellectual injury. The biggest frustration I 0:21:27.720 --> 0:21:31.960 hear about the taxonomy is first, it's gonna be really 0:21:32.040 --> 0:21:36.560 tough to implement because the asset managers who are claiming 0:21:36.560 --> 0:21:40.240 that they have sustainable funds, they'll have to report that 0:21:40.359 --> 0:21:45.119 data even if they are holding global funds with like 0:21:45.320 --> 0:21:50.320 thousands of names. And the small asset managers, which sometimes 0:21:50.400 --> 0:21:53.960 are really thematic investment manager, so you know, those impact 0:21:54.040 --> 0:21:57.119 funds that we've known forever, they will not necessarily have 0:21:57.600 --> 0:22:03.480 the financial ability to gather this data and to implement 0:22:03.520 --> 0:22:05.639 the taxonomy is going to be tough for them. The 0:22:05.720 --> 0:22:10.040 reason why the European Union decided also to force asset 0:22:10.080 --> 0:22:13.959 manager to disclose that data is because so that they 0:22:14.000 --> 0:22:17.080 can push company to disclose that data. I think that 0:22:17.200 --> 0:22:21.399 by putting asset manager under the mandatory disclosure, they'll push 0:22:21.440 --> 0:22:24.960 companies to do it, and I think they're right, but 0:22:25.080 --> 0:22:28.240 this is one of the main frustration. Second frustration is 0:22:28.280 --> 0:22:32.840 around the Manichean vision of the taxonomy. You're either green 0:22:32.960 --> 0:22:35.600 or you're not. And also to prove your grain, you 0:22:35.680 --> 0:22:38.280 have several step to photo. We're not going to go 0:22:38.320 --> 0:22:41.639 into the details of that today in this webinar, but 0:22:41.760 --> 0:22:45.920 you have several step and several tests to to do 0:22:46.640 --> 0:22:50.959 on your economic activity to prove that it's green. So 0:22:51.000 --> 0:22:53.480 it's going to be really difficult to perform. What the 0:22:53.520 --> 0:22:57.560 European Commission is answering to that is that, well, the 0:22:57.640 --> 0:23:00.760 data is gonna buy the iteration in and year after 0:23:00.880 --> 0:23:03.119 year the data is going to be better and we 0:23:03.200 --> 0:23:05.000 need to do it. So you just gotta get started 0:23:05.160 --> 0:23:08.919 regardless exactly. So there's all these other reporting frameworks you 0:23:08.920 --> 0:23:11.280 mentioned that at the top of the show, the TCFD 0:23:11.760 --> 0:23:15.240 sasby if and when the EU Taxonomy comes into play 0:23:15.280 --> 0:23:17.320 and it's successful, what happens to those Do they keep 0:23:17.320 --> 0:23:20.760 going or do they ride often in the sunset or what? Yes, 0:23:20.840 --> 0:23:24.480 we will still need some of those reporting frameworks. The 0:23:24.600 --> 0:23:28.600 taxonomy is answering some of the question, but as we saw, 0:23:28.880 --> 0:23:33.000 is very binary and the same way that you may 0:23:33.080 --> 0:23:37.719 want to report on your environmental social performance as a whole. 0:23:38.119 --> 0:23:40.680 There's going to be other regulation in the European Union 0:23:40.720 --> 0:23:44.320 because actually the taxonomy is part of a bigger group 0:23:44.760 --> 0:23:49.199 of regulations, and under the taxonomy you may rely on 0:23:49.320 --> 0:23:54.160 other reporting standards to get your data or to perform 0:23:54.240 --> 0:23:59.520 your taxonomy assessment. For instance, under the taxonomy, to prove 0:23:59.640 --> 0:24:04.000 your central contribution to climate change adaptation, you need to 0:24:04.080 --> 0:24:10.920 perform a physical climate risk materiality assessment, So you need 0:24:10.960 --> 0:24:14.600 to see how much you would be impacted by physical 0:24:14.640 --> 0:24:17.680 climate risk, and we knew that TCFD is a very 0:24:17.800 --> 0:24:23.919 robust framework to assess that. Therefore, even the Technical Expert 0:24:23.920 --> 0:24:29.280 Group the platform or promoting TCFD or at least listing 0:24:29.320 --> 0:24:32.800 it within the different framework of reporting that could be 0:24:32.880 --> 0:24:36.320 useful for your own taxonomy assessment for instance. So we're 0:24:36.320 --> 0:24:40.400 not to the finish line yet, it's not January, and 0:24:40.640 --> 0:24:43.159 between now and then and maybe beyond my what is 0:24:43.160 --> 0:24:45.119 it that you want to know? And how do you 0:24:45.119 --> 0:24:46.680 think this is all going to turn out? Is it 0:24:46.760 --> 0:24:48.200 going to end in tears or is it going to 0:24:48.280 --> 0:24:50.000 be something that's going to bring us to some sort 0:24:50.040 --> 0:24:54.000 of sustainable nirvana. I'm being optimistic. I think that the 0:24:54.040 --> 0:25:00.119 Taxonomy is really trying to finally cut through all the 0:25:00.160 --> 0:25:03.480