ERA pushes for rental in EU sustainability criteria

By Belinda Smart26 April 2022

The European Rental Association (ERA) is preparing a position paper to push for “the broadest possible inclusion of equipment rental” in an upcoming act on the EU Taxonomy Regulation, a European classification system designed to direct investment to sustainable projects.

The ERA confirmed it will request meetings with the European Commission to discuss how rental could be fully taken into account in the EU Taxonomy, which tasks the European Commission with setting up a list of environmentally sustainable activities.

The ERA is advocating for rental to be recognised in the EU’s Taxonomy Regulation, which encompasses criteria designed to foster sustainable business. (Photo: Reuters/Alamy.)

This is achieved by defining technical screening criteria for each environmental objective through delegated acts.

On 30 March, the expert group advising the European Commission on taxonomy, the Platform on Sustainable Finance – PSF, released its final report. This recommended the adoption of technical screening criteria including those relating to the circular economy.

ERA said the first draft of the report included the equipment rental sector “in a very limited way,” for example as the rental of specific electric machinery only.

It is understood that while the final report includes a broader scope, with rental and leasing activities as a whole seen as contributing to a circular economy, it remains limited to the rental of specific products.

Examples include electrical equipment, lifting and handling equipment, and power-driven hand tools. Construction machinery is not included in the list.

The EU Taxonomy Regulation entered into force on 12 July 2020, establishing six environmental objectives:

  • Climate change mitigation
  • Climate change adaptation
  • The sustainable use and protection of water and marine resources
  • The transition to a circular economy
  • Pollution prevention and control
  • The protection and restoration of biodiversity and ecosystems

Under the Regulation, large companies (large undertakings that are Public Interest Entities - PIE) with over 500 employees will have to disclose a number of KPIs in their annual report or sustainability report, including: Taxonomy-compliant share of turnover, CapEx aligned with the EU taxonomy and operating expenses aligned with the EU taxonomy.

The first company reports and investor disclosures using the Taxonomy, which cover the first two objectives, are due at the start of 2022, covering the financial year 2021. The reporting requirements covering all six objectives will apply from the start of 2024.

The first delegated act, related to climate change mitigation and adaptation, was adopted on 9 December 2021.

For the four other environmental objectives, the taxonomy rules will be established by another delegated act. This delegated act will be published by the Commission in the first half of 2022 and will be applied from 1 January 2023.

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