Thursday

26th May 2022

Investors will reject EU 'green' label for gas and nuclear

  • It would "make the taxonomy a counterproductive greenwashing tool instead of being a gold standard to prevent greenwashing," WWF has said. (Photo: Jeremy Buckingham)
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An international group of 60 investors representing around €9 trillion has warned against including gas and nuclear in the new European taxonomy [classification] on sustainable finance.

The Net-Zero Asset Owner Alliance has said, in a letter seen by Bloomberg, that the inclusion of gas "would be inconsistent with the high ambition level of the EU taxonomy framework overall".

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The European Commission is currently considering including gas and nuclear in its 'green' labelling system and is expected to make a decision in the next few weeks to a month.

This will mean that investors, like pension funds looking to green their portfolios, will be allowed to invest in gas and nuclear projects and label it sustainable.

But investors including Allianz SE, AXA Group, BNP Paribas, Banco Santander and Barclays, now say they prefer the commission to keep nuclear and gas out of the sustainable-labelling taxonomy and create a separate piece of legislation for investors who want to keep funding fossil fuels.

Standard market practice for green investments already excludes nuclear and gas projects. But the EU taxonomy would provide a 'gold standard' for markets, providing clarity for investors.

By extending the green labelling to include gas and nuclear, even in a separate category, would "tarnish investor confidence" according to Elise Attal, policy chair at the Principles for Responsible Investment (PRI). She pointed out that the EU taxonomy's goal is defining "which economic activities are green – not which economic sectors are needed for the transition to a net-zero by 2050 economy".

But France, the Czech Republic, Poland and other member states made a push to include gas and nuclear in the taxonomy at the last European Council summit in October.

At the EU Council, a draft proposal for 340 grams per kilowatt-hour was circulated among member states.

Most gas-powered stations and almost all nuclear energy would be included in the sustainable taxonomy.

MEP Pascal Canfin (Renew), chairing the climate delegation in Glasgow for the European Parliament, was critical of the proposal but said he supports gas if it is labelled transitional in the taxonomy and if it replaces existing coal power plants until 2030.

But according to the World Wild Life Fund, this would "make the taxonomy a counterproductive greenwashing tool instead of being, as announced, a gold standard to prevent greenwashing."

"What a disgrace: The EU will likely face investor backlash if it includes natural gas and nuclear energy in its green rulebook," MEP Bas Eickhout (Greens/EFA) tweeted on Tuesday.

Similarly, a group of investors representing €40 trillion wrote in a letter that "this would frustrate the efforts of investors seeking to drive the decarbonisation."

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Analysis

Are nuclear and gas green? Depends if you ask EU or experts

The taxonomy for sustainable activities was meant to be a purely science-based classification system - but it has become bogged down by political infighting (not least between Paris and Berlin), threatening its credibility.

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EU leaders unveiled a €210bn strategy aiming to cut Russian gas out of the European energy equation before 2027 and by two-thirds before the end of the year — but questions remain on how it is to be financed.

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