Imagine you’ve worked hard on your favourite recipe. Flour, eggs, milk, sugar, chocolate and pears… In the oven goes your sweet masterpiece and you just can’t wait to feast on it. Imagine that first bite, after much waiting, when you realise that someone must have sneaked in your cake… mayonnaise, red chili peppers, mustard and tomatoes. Yuk.
For the better part of the last three years a large group of experts has worked, on behalf of the European Commission, on a list of ‘green activities’, also known as the Taxonomy of environmentally sustainable investments. The list underwent a public consultation in December 2020 during which environmental experts from far and wide contributed their knowledge to make it greener and smarter.
Then one morning in April we all woke up to the taste of a modified recipe. Renewables and EVs were still there, thank God, but someone had sneaked in gas buses, dirty cargo ships and the burning of forests. Just a few incredibly unsavoury ingredients had managed to spoil the entire flavour. Little did we know, the Commission had only just started adding their mix of unpalatable and intoxicating elements: gas, nuclear power, factory farming and more unlikely additions are now bound to make the Taxonomy unrecognisable.
At T&E we support a green list that is technology-neutral and ideology-proof. This is not what the EU is doing. If you’re an environmental advocate in Brussels you get used to the fact that compromises are needed, and that last minute surprises, where the powerful lobby gets the upper hand, are a fact of life. What makes the tampering with the Taxonomy particularly detestable is that it is unnecessary. The taxonomy is simply a classification system, a disclosure regulation. If you’re a bank or a fund, you can keep investing in things like coal, oil, weapons, pesticides. The only thing that the taxonomy requires is that IF you sell your investments as ‘sustainable’ (art.8 and 9 funds in jargon), you need to declare how they match a science-based definition of green.
Environmentalists know all too well the limitations of disclosures. When T&E succeeded in making carmakers publish the vehicle’s emissions on ads, we thought people would naturally choose the ones with lower emissions. Then SUVs came along, and buying a 2-tonne tractor to face the ‘jungle’ in Paris or Milan or Berlin became more important than the quality of the air people were breathing. With sustainable finance, lobbyists didn’t even grant us the right to print the truth on the label, in small print, on the last page. Not even that.
The result is that the Taxonomy has gone from being a pioneering and bold attempt to clean up finance, to a dangerous tool for greenwashing – a polite word for fraud.
Are there lessons to be learnt for 2022?
Two at least. First, greenwashing is not a problem for the green transition, it is THE problem. One that calls for appropriate measures. Second, we cannot expect institutions to address the transition by consulting the very same lobbyists that are fighting against it. And if institutions fail to address greenwashing, it’ll be down to us, civil society, to straighten things up. Are you ready for another year of fights?