The European Commission (EC) published a new strategy for sustainable finance on 6 July. It aims to make the financial system in the European Union more sustainable by encouraging private investment in sustainable projects and activities, in line with the European Green Deal. This article seeks to answer the following questions Why a new sustainable finance strategy and what does it entail? What are the interfaces with the SFDR, CSRD and the Taxonomy Regulation? What are the next steps?

Waarom een Nieuwe Strategie voor Duurzame Financiering en wat houdt deze in? Why a new strategy for sustainable finance and what does it entail?
The reason for the new Sustainable Finance Strategy is that the global context has changed. To meet the EU's 2030 climate targets, the European Commission estimates that an additional €480 billion of investment will be needed each year, not only from the public but also from the private sector. This requires a new way of thinking about sustainable investment.
The new strategy consists of 6 actions
Expand existing sustainable finance instruments to facilitate the financing of the transition;
Greater involvement of SMEs and consumers;
Making the economic and financial system more resilient to sustainability risks;
Strengthening the financial sector's contribution to sustainability;
Ensuring the integrity of the EU financial system and overseeing an orderly transition to sustainability;
Develop international initiatives and standards for sustainable finance and support EU partner countries.
What are the interfaces with the SFDR, the CSRD and the Taxonomy regulation?
The new strategy can be divided into three groups: the expansion of the taxonomy framework, the expansion of transparency requirements for the SFDR (Sustainable Finance Disclosure Regulation), the CSRD (Corporate Sustainability Reporting Directive) and the taxonomy regulation, and the expansion of tools.
Extension of the framework of the taxonomy
The taxonomy framework has been expanded through
Adoption of additional climate legislation covering activities not yet included in the mitigation and adaptation taxonomy, such as agriculture and nuclear power. These will apply from 2021;
Adopting criteria for the remaining environmental objectives, namely water, circular economy, waste prevention and biodiversity. These will apply from 2023.
Extension of transparency requirements for SFDR, CSRD and Taxonomy Regulation
The CSRD, SFDR and Taxonomy Regulations impose additional transparency requirements on both financial and non-financial companies by incorporating sustainability preferences into investment and insurance advice. The requirements cover the environmental and social impacts of a company's activities, as well as the business and financial risks a company faces as a result of its exposure to sustainability risks (the concept of dual materiality). The table below summarises the scope, transparency requirements and status of the legislation.
EU transparency requirements for financial and non-financial parties[1] | |||
Legislation | Scope | Requirements | Status |
CSDR | All large EU companies and all listed companies (except listed micro-enterprises) | Reporting based on formal reporting standards and subject to external audit | Valid from 2023 onwards |
SFDR | Financial market participants offering investment products and financial advisers | Disclosure of sustainability risks and principle adverse impact (PAI) at entity and product level | Valid as of 10 March 2021 |
Taxonomy | Financial market participants and all companies covered by the CSRD | Turnover, capital and operating costs of the products or activities related to Taxonomy | Valid as of 1 January 2022 |
Do you need help implementing the SFDR and the Taxonomy Regulation?
With our ESG transformation service, Dufinco can help your organisation comply with sustainability legislation, including the SFDR and the Taxonomy Regulation. If you are interested or have any questions or comments following this article, please contact us at info@dufinco.nl.
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