REAL ESTATE IN THE CLIMATE MITIGATION TAXONOMY

Regulation (EU) 2020/852 (the Taxonomy Regulation) is a key element of EU climate policy as it defines the forms of economic activity/investment that can be qualified as environmentally sustainable. The purpose is to provide clarity to fund managers and to EU and member state funding authorities so that they all have the same concept of ‘sustainable investment’. It has no impact on investors themselves, who can invest in whatever they want, and it’s clearly not binding on the EU funding authorities as we saw just this week with EU tolerance of a Spanish Recovery and Resilience Plan that allows some of the building renovation it pays for to achieve only a 30% energy efficiency improvement in some cases.

But it is still a crucial benchmark destined to have major market impact, which is why it was a coup in 2019 when EPF got the EU Technical Expert Group on Sustainable Finance to introduce ‘Acquisition and ownership of buildings’ (under a NACE code that includes estate agency) alongside construction and renovation as a category of environmentally sustainable activity into its Technical Report (Table 5.2, p. 59).

The Taxonomy Regulation provides that the Commission shall adopt delegated acts to supplement the Regulation by establishing technical screening criteria for determining the conditions under which a specific economic activity qualifies as contributing substantially to climate change mitigation and adaptation. That’s important because it provides clarity on what ‘environmentally sustainable construction, renovation and acquisition and ownership’ mean.

Delegated acts are not public. The Commission merely has to consult with a committee of member state experts before adopting it and it then becomes binding unless Council or Parliament oppose it within a short time. However, there was a leak, so here they are:

Full EPF Secretariat report under epf21-22 of 15.04.2021