The ordinance (EU) 2020/852 of the European Parliament and of the Council dated June 2020 concerning the provision of a framework for simplifying sustainable investments and amending ordinance (EU) 2019/2088 (in brief: Ordinance (EU) 2020/852 is an EU ordinance that defines the specifications for sustainable investments.

The taxonomy ordinance contains criteria for determining whether a business activity is classified as ecologically sustainable (taxonomy) to be able to assess the degree of sustainability of an investment. It is a central legal act which by promoting private investments in green and sustainable projects is intended to make a contribution to the European Green Deal.

The European Green Deal is a concept presented by the European Commission with the objective of reducing the net emission of greenhouse gases to zero in the European Union by 2050, thus making it the first climate-neutral continent.

With the ordinance, financial market participants such as AIFM and UCITS management companies that wish to market a financial product (undertakings for collective investment “UCI”) as ecological are obliged to report the share of ecologically sustainable investments in their UCI as specified in the ordinance.

https://eur-lex.europa.eu/legal-content/DE/TXT/PDF/?uri=CELEX:32020R0852&from=DEent/EN/TXT/PDF/?uri=CELEX:32020R0852&from=DE

Three types of financial products

Financial market participants are obliged to disclose information about how and to which extent the criteria for ecologically sustainable business activities are used when they offer financial products as ecologically sustainable investments or as investments with similar features.

With respect to the disclosure ordinance, the taxonomy ordinance distinguishes between three types of financial products:

1. Financial products that advertise ecological or social aspects (Art. 8 disclosure ordinance – “bright green” products)
2. Financial products that seek sustainable investments (Art. 9 disclosure ordinance –”dark green” products)
3. Other financial products.

Pursuant to Art. 6 of the taxonomy ordinance, the following statement must be added when financial products advertise ecological features:

The principle of “avoidance of significant disruptions” applies only to those investments that underly the financial product which consider the EU criteria for sustainable business activities. The investments that underly the remaining part of this financial product do not consider the EU criteria for ecologically sustainable business activities.

Pursuant to Art. 7 of the taxonomy ordinance, the following statement must be added for other financial products.

“The investments underlying this financial product do not consider the EU criteria for ecologically sustainable business activities.”