January 20, 2020

January 17, 2020

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European Commission Finalizes Taxonomy Regulation

On December 17, 2019, the European Commission published the text of the proposed “regulation on the establishment of a framework to facilitate sustainable investment,” which is also known as the “Taxonomy Regulation.” This forms part of the EU’s sustainable finance reforms. More information is available in the May 10 edition of Corporate & Financial Weekly Digest and December 13 edition of Corporate & Financial Weekly Digest.

The purpose of the Taxonomy Regulation is to enable firms and investors to identify environmentally sustainable economic activities. It will apply to financial market participants who offer financial products, as well as companies to whom the Non-Financial Reporting Directive applies (generally, large, EU-listed public companies).

In order for an activity to be an “environmentally sustainable economic activity,” the activity must make a “substantial contribution” to at least one of six “environmental objectives.” The environmental objectives include:

  • climate change mitigation;

  • climate change adaptation;

  • sustainable use and protection of water and marine resources;

  • transition to a circular economy (e.g. recycling);

  • pollution prevention and control; and

  • protection and restoration of biodiversity and ecosystems.

Further requirements for an activity to be environmentally sustainable are that it must not “significantly harm” any of the other environmental objectives, it must meet the “minimum safeguards” (such as complying with the International Bill of Human Rights), and it must comply with any other criteria specified by the European Commission in delegated acts, which will be adopted between now and the end of 2022.

The Taxonomy Regulation will become effective 20 days after its publication in the Official Journal but will only apply once all of the delegated acts have become effective. It is currently expected that the first two climate-related environmental objectives will apply from December 31, 2021, and the four remaining objectives will apply from December 31, 2022.

The proposed Taxonomy Regulation is available here.

©2020 Katten Muchin Rosenman LLP

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John Ahern, Financial Attorney, London, Katten Law Firm
Partner

John Ahern, partner at Katten Muchin Rosenman UK LLP and head of the London Financial Services group, focuses his practice on banking, financial services, UK and European financial markets, and related regulations. His background in private practice and as in-house counsel at a global investment bank provides him with perspective on the unique regulatory issues facing the wholesale and private banking sectors. John advises multilateral trading facilities, broker-dealers and banks on trading, clearing and settlement as well as custody of securities—both physical and...

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Carolyn H. Jackson, International Attorney, Katten Muchin law firm
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Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws and regulations. 

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Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
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Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring...

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Neil Robson, private equity fund managers counselor, Katten Law Firm, London
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Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...

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