Friday

10th Apr 2020

EU reaches deal to define 'sustainable' investment

The Finish EU presidency, European Commission and the European Parliament on Monday evening (16 December) all agreed on the common classification system for environmentally-sustainable investments - after disputes on whether gas and nuclear can be considered "green".

"With this deal, we now have a common language and new rules for financial markets," said Pascal Canfin, a French MEP who chairs the European Parliament's environment committee.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The agreement is the first step to set a framework for sustainable finance, that will help investors and consumers to identify economic activities that can unambiguously be considered environmentally green.

The taxonomy also aims to end greenwashing and oblige corporates to disclose environmental, social and governance (ESG) factors and risks.

"This [classification] will [assist] financing an economy that is truly aligned with the Paris Agreement, but also enables to increase the transparency of financial markets," Canfin added.

The commission is expected to draft technicalities of the different categories "low-carbon", "transition" or "enabling" activities by the end of 2020, although the full set of labels will be developed by a Technical Expert Group on Sustainable Finance.

According to the commissioner for the EU's economy, Valdis Dombrovskis, this taxonomy is "the much-needed enabler to get green investments to flow and help Europe reach climate neutrality by 2050".

The working process of this new legislation sped up in October and November when Dombrovskis called it the "most important legislative piece" to achieve EU's climate goals.

The European Banking Authority (EBA) also welcomed the deal as "a major step" for sustainable financing.

"Greening the financial sector is a first step to make investment flow in the right direction, so it serves the transition to a carbon-neutral economy," said Finish MEP Sirpa Pietikäinen from the European People's Party (EPP).

Gas and nuclear disagreement

The previous version of the taxonomy was blocked last week by nine countries (France, UK, Czech Republic, Poland, Hungary, Slovakia, Bulgaria, Romania and Slovenia), fearing a negative impact on investment in nuclear and gas projects.

"Gas and nuclear can under no circumstances be included in the category of so-called "pure green" investments, but they are neither included nor excluded in principle from the other categories," said Canfin.

These energy forms, like all technologies covered by the taxonomy, will be subject to the "do not significant harm" (DNSH) principle - while contributing to one environmental objective, the activity must not significantly harm any of the other goals.

The amendment that managed to convince member states on Monday, before MEPs agreed on the proposal, slightly weaken the wording of the DNSH principle.

However, according to Sébastien Godinot, economist at NGO Worldwide Fund for Nature (WWF), "the final result is a robust and balanced deal ensuring that the taxonomy will be built on climate and environmental science – a must for this critical part of the EU sustainable finance agenda".

According to Bas Eickhout, vice-president of the Greens/EFA political group, "financial products will need to prove their sustainability under strict EU criteria" and this will encourage the markets to make sustainable investments the mainstream.

"The financial sector must play its role in the green transition and taxonomy will help push them towards sustainable investments," he added.

Next steps

The final confirmation will be done by EU ambassadors on Wednesday and by a plenary vote that will probably take place in January 2020.

However, it is assumed that these two final steps will not reopen discussions on the file in terms of its content.

The agreement reached must also be approved first by the two parliament's committees involved - environment and economic affairs committee.

The commission will regularly update the "technical screening criteria" based on scientific evidence.

However, the commission will have to develop a specific taxonomy of economic activities that significantly harm the environment by the end of 2021.

The taxonomy should be established by the end of 2021 to ensure its full application by the end of 2022.

However, a coalition of more than 30 civil society organisations believe that "given the urgency of the climate crisis, the law should ensure that the climate taxonomy enters into force before the end of 2020".

"We cannot afford to delay such action as investments are badly needed," they wrote in a letter to EU top negotiators.

COP25 ends with no deal on carbon markets

The outcome of the UN climate conference in Madrid (COP25) has been described as a "catastrophe" by environmental groups, since countries failed to agree on article six of the Paris Agreement, referring to the carbon markets system.

Warning of agricultural 'digital arms race' in EU

Europe is on the verge of allowing centralisation and concentration of farming data at an unprecedented scale, with the absence of any regulation, NGO Friends of the Earth have warned.

What will Brexit mean for climate action in EU and UK?

The UK is leaving the EU after playing a key role in climate action - just as COP26 comes to Glasgow. With so many policy negotiations ahead, a split between London and Brussels post-Brexit could undermine the 2050 emissions-neutrality goal.

News in Brief

  1. Migrants trapped on boat in Tripoli due to shelling
  2. EU anti-crisis budget 'could be up to €1.5 trillion'
  3. Western Balkan states appeal for EU help with masks
  4. Spain's lockdown could be extended until 10 May
  5. IMF: Pandemic crisis will be worse than great depression
  6. German economy minister expects progress on EU deal
  7. Italian PM: EU is at risk if no deal on recovery plan
  8. Belgian region to block EU Green Deal

What will Brexit mean for climate action in EU and UK?

The UK is leaving the EU after playing a key role in climate action - just as COP26 comes to Glasgow. With so many policy negotiations ahead, a split between London and Brussels post-Brexit could undermine the 2050 emissions-neutrality goal.

Timmermans: EU climate law will 'discipline' rogue states

The first EU-wide climate law will be a "disciplining" exercise to implement the Green Deal - although the Polish climate minister Michal Kurtyka warned the EU Commission about the social cost of delivering the green transition.

Stakeholders' Highlights

  1. UNESDAMaking Europe’s Economy Circular – the time is now
  2. Nordic Council of MinistersScottish parliament seeks closer collaboration with the Nordic Council
  3. UNESDAFrom Linear to Circular – check out UNESDA's new blog
  4. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  5. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  6. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms

Latest News

  1. How the EU's virus-alert agency failed
  2. Flemish nationalists torpedo Belgium Green Deal pledge
  3. Eurozone agreed €500bn cushion against virus blow
  4. Why Europe must act now, and on a big scale
  5. EU court blocks Poland's bid to 'frighten' judges
  6. Coronavirus sees approval-rating soar for EU leaders
  7. EU science chief who 'quit' had been told to resign
  8. EU delays 'exit strategies' plan, as WHO urges caution

Join EUobserver

Support quality EU news

Join us