Lothar Rieth, Head of Sustainability at EnBW, and Sebastian Rink, Sustainable Finance Expert at the Frankfurt School and Advisor to the Net Zero Banking Alliance Germany, discuss the results of the study in an interview with Kristina Jeromin.

What is the aim of the cooperation between econsense and Frankfurt School regarding the implementation status of the taxonomy?

Rieth: Following many discussions about the introduction of the discussion, the actual function of the EU taxonomy has been lost sight of, namely to mobilize private resources in addition to limited public resources to achieve sustainability and climate protection goals in Europe. We, therefore, wanted to present an initial comprehensive analysis for German companies to demonstrate whether the EU taxonomy was able to set important impulses towards private sector action.

Honestly, where are we or where is the market currently?

Rink: The study shows: there is still room for improvement. Currently, only a small part of the economy makes substantial contributions to climate protection. The investment figures indicate that the economy is making progress, but the pace needs to pick up here too. There are significant differences between sectors. For example, the energy sector is on a comparatively good path, whereas a large part of the industry still needs to catch up.

Rieth: The study shows very well that the EU taxonomy already covers a large part of business activities in selected sectors. In the energy industry, we were able to directly calculate and display the high proportion of our taxonomy-compliant activities. Looking at German and other European energy companies, many already have a taxonomy-compliant CAPEX share of over 70%.

Where do you see the biggest opportunities but also challenges?

Rieth: For us, the greatest opportunity in the EU taxonomy lies in credibly proving our transformation to a sustainable infrastructure partner with robust figures. Even in the energy industry, we have to deal with accusations of greenwashing. Now we can show with our green CAPEX and voluntarily with our green adj. EBITDA share that we invest comprehensively in sustainable technologies. Alongside this opportunity, we are naturally also confronted with a massive challenge: In particular, the initial processing of the EU taxonomy requires very comprehensive input from various specialist areas. To set up a robust taxonomy reporting for a group like EnBW, we therefore established a cross-departmental project team that continuously works to also meet the new complex requirements like the recently adopted TAXO4 extension of the EU taxonomy.

Rink: With the EU taxonomy, we have defined uniformly in Europe for the first time how and when business activity contributes to climate protection. This means that companies now have an official playbook for the Green Deal and can adapt their strategies accordingly. This is a huge opportunity for the European economy! The EU taxonomy is constantly being developed further and not all economic activities that can make substantial contributions to climate protection and the EU’s other environmental goals are covered yet. For example, criteria for agriculture are still lacking. This should be changed as soon as possible so that the playbook becomes available for all relevant economic activities.

How do you currently see the dialogue between the real economy and the financial sector on questions of transformation financing? What is already going well and where is there room for improvement? What role does regulation play here?

Rieth: When issuing green bonds for our debt financing, we see that the EU taxonomy is very useful to us as a standard. Since we can already prove certain business activities as audited taxonomy-compliant, we can point out the taxonomy compliance of our business activities in the dialogue with banks and investors – in addition to the Second Party Opinion – as recommended by the EU Green Bond Standard.

What is the next step after the publication of your joint paper? Are you planning further joint initiatives?

Rink: German companies have reached an important milestone with the reports on the first EU taxonomy indicators. Now the aim is to advance the application of the EU taxonomy in the financial system, strengthen the applicability of the EU taxonomy in companies, and determine the effectiveness of the EU taxonomy in redirecting capital flows. For this purpose, dialogue formats between politics, practice, and research, further educational measures, and research activities are necessary. We will be intensifying these in the coming months.