MTK fully supports the idea of having common rules for sustainability, substantial contribution (SC) and the basic level on the Do no significant harm principle (DNSH). Nevertheless, they should fit in purpose also on a local level. Director-General John Berrigan (DG FISMA) stated in the Sustainable Finance Platform’s meeting nearly two years ago that a lot of substantial changes have happened in the business environment. Especially since the introduction of the taxonomy, the Ursula von der Leyen’s Commission has introduced a huge package of sustainability legislations part of the European Green Deal. Many of these initiatives have links to taxonomy, e.g. Justified Transition Fund (JTF), Stade Aid Guidelines, Corporate Sustainability Reporting Directive (CSRD), Environmental, Social and Governance (ESG) just to name some. 

The taxonomy is a key element in Green Deal Europe. When taxonomy was presented for the first time, taxonomy was based on voluntariness. Taxonomy was seen as a goal-oriented, high-ambition level indicator without connection to any other legislative proposals. Unfortunately, the situation is no longer the same. CSRD and ESG connect the information of companies' financial statements and financing opportunities, where the taxonomy has been made an indicator for the sustainability of operations through the six measurable objects of the environment. 

MTK supports the idea of the three basic requirements of the taxonomy criteria. They must be science-based, widely usable and politically acceptable. For our members the main issue is that the criteria should enhance the climate and environmental status on a local level, where global rules do not fit in purpose. Until now, impact analyses have only analysed the needs of financial markets, not the challenges of companies operating in the industries or their suppliers, including farmers and forest owners. Political acceptance certainly requires that the criteria must not discriminate against Northern European production, be it agriculture or forestry. 

Agriculture and forestry are key sectors in mitigating climate change’s impacts and tackling biodiversity loss as these sectors provide a lot of solutions. In MTK, we are committed to using climate and biodiversity road maps to produce both climate and biodiversity benefits. 

The preparation of the taxonomy criteria for agriculture has been waiting for the reform of the agricultural policy. Now, the implementation of the new policy period is well under way, and through the national strategic plans, together with the Commission, priorities and measures have been drawn up to achieve the environmental and climate goals of the agricultural policy. Linking criteria for sustainable financing is a natural continuation of agricultural policy reform. In practice, this means that the conditionality presented by CAP creates a controlled and science-based basis for the requirements of sustainable financing as well. In the future, substantial contribution must be connected to eco schemes that are presented by the member countries and approved by the Commission in accordance with the normal preparation process.  

At the same time, this is the only working model for achieving the 25 percent reporting reduction target that the Commission is aiming for. 

With regards to climate criteria for forests, MTK has started developing a model in cooperation with forest management associations to produce a climate benefit analysis that is included part of climate Taxonomy for forest management (climate change mitigation). Unfortunately, forest owners do not have enough guidance on how these criteria should be implemented as forest owners have faced challenges, e.g. how to define a baseline for climate benefit on a forest holding level. By far, the implications for forest owners are unclear and there is no clear added value for taxonomy-compliant product chain or forest owners as a primary producer. 

MTK has also been active in the work related to the second set of criteria for forests (biodiversity). The Sustainable Finance Platform’s proposal is not applicable for a big majority of family forest owners as it is in contradiction with the already established forest management practices. Impossibly implementable thresholds that were presented part of Platform’s proposal do not acknowledge insufficiently local circumstances and scientific evidence. To tackle this challenge, MTK has developed an alternative set of criteria that recognises the differences of forest types and management practices across the Europe. The alternative proposal is included in the Platform’s report and mimics the criteria for climate forest taxonomy. This would make both criteria coherent. 

MTK is happy to participate in further work on sustainable finance preparation on EU level. 

Juha Marttila

President

+35820 413 2340

+35850 341 3167

Juha Ruippo

Director, trade and development policy

+358 20 413 2341

+358 40 55 33 232