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For the first time, new rules would set out which financial investments can be labelled environmentally sustainable. Green transport group Transport & Environment (T&E) said the EU green ‘taxonomy’ law would be a cornerstone of sustainable finance that will help channel investments towards a new clean economy.
European governments yesterday overturned their earlier opposition to the rules when France and the UK weighed in behind a slightly amended version of the text, which clarified that the criteria to be counted as ‘green’ would be technology neutral. The change would mean that all energy sources and technologies would have to meet the same thresholds under the criteria – and there would be no explicit exclusion of any technologies.
Luca Bonaccorsi, director of sustainable finance at T&E, said: ‘More than 130,000 Europeans told governments to stand firm against greenwashing of financial services, and today they finally delivered for their citizens. The EU’s green standard will mean people can no longer be sold fake green investments, and money can instead flow to sustainable businesses like electric mobility and renewables. It is the most progressive piece of financial legislation in the world.’
T&E said that the regulation sets a legal framework for the EU’s taxonomy of environmentally sustainable activities to be based on scientific evidence rather than political compromises. It will cover all investments and require financial actors, including fund managers, the issuers of bonds and listed companies, to disclose how green their investments are.
Leading MEPs were expected to green-light the text late last night, and member states’ ambassadors are due to rubber-stamp it on Wednesday.
But the next big legislative fight will be to draw up the actual criteria for environmentally sustainable investments. The European Commission will have the final say, but it must do so based on recommendations from a technical expert group made up of NGOs, financial market companies and EU agencies. T&E said that civil society groups are expected to closely scrutinise this process to ensure that only truly sustainable investments make the cut.
The EU’s climate taxonomies are expected to be published in 2021, becoming the most advanced and credible standard for green finance in today’s global capital markets. Disclosure requirements for financial markets and corporations would enter into force from January 2022.
Luca Bonaccorsi concluded: ‘Now everyone’s focus will be to make sure the list of environmentally sustainable activities and their ‘thresholds’ are science based. A swarm of special interests will try to rewrite these rules behind closed doors, but civil society groups and thousands of concerned citizens will be keeping a very close eye.’