Brussels (Brussels Morning) The European Commission gave another boost to the European Green Deal with yesterday’s presentation of measures to improve the flow of money to sustainable projects across the EU.
“The new EU taxonomy criteria will define activities that best contribute to fighting climate change and to guiding the massive investments needed. Other measures will ensure companies provide reliable information on sustainability”, Commission President Ursula von der Leyen stated.
The EU taxonomy focuses on six environmental objectives — climate change mitigation, climate change adaptation, sustainable use of water and marine resources, circular economy, pollution prevention and a healthy ecosystem.
According to the Commission, in order for an economic activity to align with the EU taxonomy, it must contribute substantially to at least one of the six environmental objectives while doing no “significant harm” to any of the stated goals. It should also comply with minimum safeguards, including international guidelines.
A study defining the technical screening criteria for the new EU taxonomy was published yesterday by the Commission’s science and knowledge service, as a means of contributing to climate change mitigation.
Armed with the Commission’s sustainable package, investors will be in a position to re-orientate investment towards more sustainable technologies and businesses while helping advance Europe’s goal of climate neutrality by 2050.
The package helps guide support towards sustainable investment, establishing defined economic activities and spelling out how these contribute to the EU’s environmental goals. It also puts in play a proposal for legislative action — Corporate Sustainability Reporting Directive (CSRD) — which would require businesses to comply with sustainability reporting stipulations.
“This means 50.000 – instead of 11.000 – companies will have to report on sustainability”, Trade Commissioner Valdis Dombrovskis said, welcoming the proposal.
The Commission maintains that widening the reporting base will make “sustainability reporting by companies more consistent”, enabling financial firms, investors and the broader public access to comparable and reliable sustainability information.
The final element in the Commission’s package is designed to amend procedures dealing with fiduciary duties, investment and insurance advice so as to ensure that financial businesses incorporate sustainable practices in their procedure as well as in their investment advice to clients.
Nuclear and gas
After complaints from several EU countries of a “discriminatory” approach, the EU’s taxonomy authority stated that it continues to assess whether nuclear energy qualifies for consideration as part of the sustainable financing.
As for natural gas, the Commission said it will consider “specific legislation to ensure that activities contributing to emissions reductions would not be deprived of appropriate financing”.
“We oppose the idea to exclude the nuclear and gas sector from the current Taxonomy Delegated Act and include it in a separate legislation. We believe that it would be wrong to mark nuclear and gas for a transitional period of time clearly as not green and it will substantially harm countries with a strong share of industry in their economy“, eight member state prime ministers urged.
According to MEP Pascal Canfin (Renew Europe), the Commission is right to consider de-linking nuclear and gas from the rest of the green finance taxonomy. While Canfin concedes that the two are politically important, he believes it would have been unacceptable to hold the rest of the taxonomy hostage.
As it stands ready to act upon the EU’s taxonomy, the European Investment Bank (EIB) described the Commission’s work as a “hugely important step to direct finance into investment for climate and environmental sustainability”. The EIB further pledged its commitment to “greater transparency” and a common terminology to speed progress towards a zero carbon future.