Experts on the EU taxonomy
Fredrik Ljungdahl, ESG Controller,
Wihlborgs Fastigheter

In the third part of this interview series, we have the pleasure of sharing Wihlborgs Fastigheter’s
ESG controller Fredrik Ljungdahl’s insights and thoughts.

 

The EU taxonomy has undeniably made headlines and raised issues within both sustainability and finance. Although the vast majority agrees that the taxonomy is a relevant step forward, there is yet much left to be defined and still much to learn from its practical application.

To raise our knowledge about the EU taxonomy, we have interviewed experts with different perspectives who have already gained a clear picture of what the taxonomy means in practice. In the third part of this interview series, we have the pleasure of sharing Wihlborgs Fastigheter’s ESG controller Fredrik Ljungdahl’s insights and thoughts.

Tell us briefly about your background and how you first came in contact with the taxonomy.

I have been working at Wihlborgs Fastigheter in the role of ESG controller for a little over a year, but before that I was responsible for Sustainability Services at the consulting firm PwC. As a consultant I came into contact with the EU taxonomy quite early. I also have PhD background in Sustainable Accounting from Lund University. I have worked with sustainability for over 20 years and during this time I have seen how these issues have gradually climbed higher up on the EU agenda, becoming increasingly important for business and society.

What are your impressions of the taxonomy so far?

My impressions are generally positive, despite the taxonomy being in some respects perceived as unnecessarily complex and difficult to apply. I think it is relevant to have an established definition of what is considered “sustainable”, supporting investors to make informed decisions. Sustainability has been plagued by “greenwashing” and poor reporting quality to capital investors for far too long. My hope is that the taxonomy will serve as to improve both sustainability communication and reporting across the board when fully implemented. 

What effects do you expect the taxonomy to have for listed companies?

The taxonomy has the potential for quite a significant impact, but it will depend on how it is received by investors. If ESG/sustainability issues maintains a sense of urgency in the public interest and if taxonomy comparable accounting proves useful, it is probable that more capital will be invested in the most sustainable activities as intended by the EU. A listed company that does not succeed in attracting capital does not become very attractive on the stock exchange.

And for the others?

After all, those who are primarily affected by the taxonomy are financial players who need to introduce processes to follow up and report on how sustainable their investments are. Many of these effects are already in full swing, but continuous improvements will be required. From another perspective, additional parts of society are bound to be indirectly affected, and when discussions arise on what is sustainable or not, the taxonomy will act as a reference point. In the future, consumers should be able to expect that those products and services that are not in line with the taxonomy, will not be marketed as “sustainable”.

What advice would you give to unlisted and listed companies regarding taxonomy and sustainability work?

I think that all companies should see the taxonomy as an opportunity instead of something difficult and bureaucratic, although it takes some work to get acquainted with it. The taxonomy acts as a clarification of what can be considered as sustainable activities across industries and highlights on what areas these activities need to improve from the overarching perspective of combating the climate crisis. My advice is to take the taxonomy into account and gradually adapt the business to it as much as possible. If the taxonomy succeeds in having the impact the EU hopes for, achieving the status of compliance will be financially profitable.

The taxonomy has been faced with some opposition. What are your thoughts on that?

I can understand that some perceive the taxonomy as overwhelming and difficult to apply – and it might be true that it would have been possible to achieve similar effects through a different approach. At the same time, I think the potential benefits in terms of a more consistent reporting of what is sustainable outweigh the disadvantages. One can also hope that the taxonomy will be further developed and become more user friendly in the near future.

The taxonomy is still new, what will be the next step?

Even if the basics of the taxonomy are clear and the technical screening criteria for climate impact are known, it remains to establish a set of criteria for the EU’s additional environmental goals. There is a draft in place presenting criteria for additional environmental goals, including biodiversity and circular economy. It is open for feedback until September 24th. The taxonomy is definitely under further development! 

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